MHA partner, Joe Spencer has responded to the government’s announcement regarding simplified tax reporting for self-employed and small businesses, stating that he believes the changes could help business owners access tax relief on overlapping profits “far earlier than they currently can”.
The changes, which will come into force by 2023 and have been drawn-up alongside representatives of small businesses, will mean businesses will be “taxed on profits arising in a tax year, rather than profits of accounts ending in the tax year”.
The government said this should help small businesses “spend less time filing their taxes” – aligning the way self-employed profits are taxed with other forms of income, such as property and investment income.
Spencer said: “The current tax system is unnecessarily complex for small businesses, particularly over the so-called ‘basis periods’ as businesses that start and draw up their accounts to a different date than the end of the tax year are often the victims of profits being taxed twice. Accessing the appropriate tax relief for this is complex and can take a long time.
“Although the full details of the reforms are yet to be revealed, if they will enable small businesses to access tax relief on overlapping profits earlier, which seems to be the government’s intent, this will be a significant win for business owners, especially for liquidity and administrative purposes.”
He added: “While this is a step in the right direction, reforms should go further than just simplifying the basis period of assessment. Calculating taxable profit will remain a very complex task for business owners and the whole system needs further simplification.”