Sole traders and partners are likely to face bigger tax bills than expected next year after a government proposal to change the date certain businesses report their profits, the Institute of Chartered Accountants in England and Wales (ICAEW) has predicted.
The move would generate billions of pounds for the Treasury years before it would otherwise have received the money and reduce the amount of working capital partners and sole traders will have for up to five years.
A consultation and draft legislation published last month revealed plans to alter the 12-month period partners and sole traders use to calculate profits to bring everyone in line with either 31 March or the end of the tax year on 5 April.
The change would mean tax liabilities, which businesses and their partners are currently able to defer by having a later date for the end of their accounting year, will be brought forward.
Based on tax returns for 2019/20, the measure is expected to affect almost 250,000 partners and 280,000 sole traders.
Anita Monteith, Senior Policy Adviser at the ICAEW, said: ‘Because these big partnerships earn mega bucks, you can get a nice healthy lump of cash flowing into the exchequer that will help to pay down some of the enormous national debt.’