We are urgently warning performers without professional representation (by us or whoever else
runs their accounts) to keep an eye on the post as HMRC begins to roll out what is known as
“Basis Period Reform”.
For some performers, there is a chance of welcome news but only if they act fast to obtain what
is known as “”Overlap Relief”.
Now, I don’t know anyone who urgently opens those brown envelopes from HMRC with
anything other than a creeping sense of dread but there is some potential good news to be
heard along with some potential challenges – it was ever thus with tax.
Basically, HMRC has been writing to people ever since January about a very dry subject called
“Basis Period Reform because a few years back, the boffins at the treasury decided that all self-
employed or sole traders must be doing their accounts and their tax return to the fiscal year-end
date.
So either 31st of March or the first, second, third, fourth, or 5th of April. Bottom line, they have to
report on their tax return 12 months or more to that date. So if your year-end was the 30th of
April, 2022 for the tax year reporting of 2023-2024, you’ll need to report your year to the 30th of
April 2023, plus all your accounts from the 1st of May, 2023 to the 31st of March, 2024 (or 5th
April 2024).
Here’s the bad news.
That could in theory give you 23 months worth of accounting in one year and 23 months worth
of profit, and that gives you 23 months worth of taxes. Not ideal!
Now, there is a chance that if you had an accountant when you first started up, they potentially
would’ve set you on a different year-end period than the 5th of April or the 31st of March.
That meant that you could delay paying tax. However, fast-forward to the first period that you
paid tax and you would’ve actually paid tax TWICE on the same income.
But look…here’s the good news!
If that is the case, that amount is sitting in the HMRC vault with your name on it. It is called
overlap relief and you can use that relief to offset against a longer than 12 month period.’
However, the opportunity to discover whether you can obtain overlap relief is shrinking everyday
and with backlogs dogging HMRC for months now, Louise is urging anyone who receives one of
these letters to act immediately.
If your year-end is not 31st of March or the 5th of April, don’t wait until you start working on your
Self Assessment in December and January to get this figure. Why? Well, Tax year 2023/2024 is
the last year you can use it!
Plus, those delays at the tax office are not getting any shorter. If you don’t find this figure and
put it on the tax return, then you’ll lose that relief, and you cannot bring it forward anymore.
Getting this relief is one of the only things that HMRC will use email for, unless you opt for post,
and it is supposed to come in 15 to 30 days but don’t count on it. Mercifully, there is some
guidance on the HMRC website, but in news that will shock absolutely nobody, it is not very
clear.
There is apparently hundreds of thousands of money sitting with HMRC in the overlap relief
area but unless you claim it, HMRC will not tell you if you have an amount owing. So please,
take a look ASAP and get cracking. Or speak to someone like me who can help you with this.’
So what do I do now Louise?
Mercifully, there is some guidance on the HMRC website, but in news that will shock absolutely
nobody, it is not very clear.
So, go back to your workings. Hopefully, you’ve still got them from the 1990s?
See if there is anything on your tax return that kind of explains what it’s all about. There is
apparently hundreds of thousands of money sitting with HMRC in the overlap relief area but
unless you claim it, HMRC will not tell you if you have an amount owing.
Now, when this first started to get introduced and we were told about it, it was during COVID.
What some accountants did then was crash the new period together and HOPEFULLY applied
the overlap relief if they knew about it but it is still worth looking at old tax returns and seeing,
did your accountant put you on a strange year-end, and now you’re on the 5th of April? Fill out
the form, if that is the case.
We are pulling together a guide on finding what your overlap relief is and how to work it out. But
for this year, if you do find you’re in that situation and you’re not currently a client of
ours, then we will try and work this out for you.
In fact, come on board as a client for this one-off piece of work and then you can easily do your
own tax return from 2024-2025 (unless you like us and want to stay! Book your call here!).
