08 November 2023

Change of Reporting Date

Basis Period Reform and the Solicitors’ Accounts Regulations 2014

 

HM Revenue and Customs Basis Period Reform

HM Revenue and Customs have introduced a new Basis Period Reform measure which changes the way trading income is allocated to tax years. This measure affects various business types including self-employed individuals with a profession or vocation, partners in trading partnerships, other unincorporated entities with trading income and LLPs.

These changes will likely impact businesses that currently do not prepare their annual accounts with an accounting date between 31 March and 5 April. The new rules state that all affected businesses will be taxed on profits generated between the start and end of the tax year (April 6 to April 5), regardless of their year-end accounting date for preparing accounts.

These changes will take effect from the tax year 2024 to 2025. The current tax year 2023 to 2024 marks implementation of the new rules and transition from the existing ‘current year basis’ of taxation (up to a business’s own accounting date) to the new ‘tax year basis’ of taxation (up to 5 April).  

More information regarding the Basis Period Reform measure is available from HM Revenue and Customs here. Businesses which may be affected should obtain specialist accounting/taxation advice.

The Solicitors’ Accounts Regulations 2014 and Change of Reporting Date

Implementation of the new Basis Period Reform measure may give rise to affected businesses considering whether to change their accounting/reporting date.

Members are reminded that, should they seek to change the reporting date for their business, they must also (continue to) satisfy the separate requirements of the Society’s Solicitors’ Accountants Regulations 2014 (‘the Regulations’). 

Members are referred to Part F – Accountants’ reports of the Regulations in general, and Regulation (31.4) – Change of reporting date, in particular.

The Regulations are available on the Society’s website here and Guidance Note to the Regulations here.

These requirements include:   

1.      A solicitor who at any time during an accounting period, operated an office or client account, must deliver to the Society an Accountant's Report for that accounting period within 4 months of the end of the accounting period.

2.      The accounting period means the period for which the accounts of the solicitor are ordinarily made up, except that it must begin at the end of the previous accounting period and cover the preceding 12 months.

3.      When a solicitor either first commences or ceases to practice on their own account the accounting period may cover less than the preceding 12 months.

4.      If a solicitor seeks a change of reporting date in relation to the submission of their Accountant's Report, the reporting period immediately preceding the change may be shorter than 12 months or the reporting period may be extended to longer than 12 months (from the end of the previous accounting period) but only up to a maximum 15 months.

5.      However, such extension is conditional upon the Society receiving written notice of the change of reporting date sought, at least 3 months before the deadline for delivery of the Accountant's Report that would have been expected based on the solicitor's original accounting period.

6.      The Society also reserves the right to require the report for any extended reporting period to be delivered to the Society within a timeframe of less than 6 months from the conclusion of the solicitor’s original accounting period.

Should members have any queries regarding the Regulations and change of reporting date, please do not hesitate to contact the Society’s Professional Conduct Department via email at Regulation@Lawsoc-ni.org.