Consultation on Draft Base Period Reform Figures – Law Society Response


Last year we responded to HMRC’s consultation on how trading profits – including profits from the legal profession – are allocated to tax years for tax purposes.

This is also known as base period reform.

The reforms are now enacted in the 2022 finance law and there will be a transition year to put them into effect from April 2023.

The changes will mean that more taxpayers, including a significant proportion of partners in law firms, will have to submit provisional figures on their tax returns, which will then have to be corrected.

The reforms give rise to particular complexities for large international law firms.

HMRC is consulting on potential easements for people and businesses in this situation. The options offered include:

  • allow more time to file amended tax returns
  • extension of tax filing deadlines
  • allow adjustments to a previous return in the next tax return

Our point of view

Our brief aims to identify, explain and promote potential easements that may be comparatively more useful to law firms.

Amendments must be authorized either by re-filing declarations or by making adjustments in the following declaration (each within sufficiently generous time limits).

We also ask:

  • a postponement of the entry into force of the new rules for partnerships and LLPs
  • a feedback mechanism at the partnership level
  • a safe haven for interest on underpaid taxes

Next steps

HMRC will assess the information and views received during the consultation.

It aims to identify possible solutions by fall 2022.