Policy paper
Basis period reform
This Tax Information and Impact Note details legislation introduced to simplify the basis period rules for the self-employed and partners.
Documents
Details
This measure changes the way trading income is allocated to tax years. Current rules are based on a business’s accounting date, and can create overlapping basis periods, which charge tax on profits twice and generate corresponding ‘overlap relief’.
This measure simplifies the basis period rules for the self-employed and partners so that a business’s profit or loss for a tax year is the profit or loss arising in the tax year itself, regardless of its accounting date. This removes the complex basis period rules and prevents the creation of further overlap relief.