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Speed of basis period reform risks integrity of tax system, warn professional bodies


Published: 19 Aug 2021 Update History

ICAEW has joined other finance and tax professional bodies in warning the Financial Secretary of the Treasury that the proposed timetable for reforming basis periods will place “enormous pressure” on business, advisers and HMRC, and risks undermining trust in the UK tax system.

In a letter to Jesse Norman MP on 16 August, representatives from the Association of Taxation Technicians (ATT), the Chartered Institute of Taxation, ICAEW and ICAS, have called for the government to urgently reconsider the timetable for planned changes to basis periods.

They argue that the reforms are being implemented too quickly and put “the integrity of the tax system at risk”, by piling pressure on taxpayers, agents and HMRC itself.

The professional bodies highlight that the proposed changes come alongside a host of other developments in the tax system, most notably the introduction of Making Tax Digital for income tax self assessment (MTD ITSA), the expansion of MTD for VAT and changes to penalty regimes.

“Businesses in the UK have risen to the combined challenge of Brexit and the global pandemic and the tax profession continues to support them. At this time, we do not need the added complication of a multiplicity of fundamental changes to the tax rules in consecutive years,” states the letter.

While welcoming the simplification that some businesses will see as a result of basis period changes, the bodies warn that the reforms will add complexity for others that cannot move their accounting year ends and will result in many having to pay tax earlier.

They also highlight that basis period reform and MTD ITSA will affect many small and unrepresented businesses, which will need support from tax advisers, HMRC or tax charities to understand the changes.

The bodies conclude: “Taken together, these are major changes to the tax system and require an extensive public education exercise to be undertaken similar to that which was undertaken when we moved to self-assessment in the 1990s.

“We urge the government to reconsider urgently the timetable for the basis period and MTD ITSA proposals.”

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