Currently, this allocation is determined based on the accounting period ending in the tax year.

In their description of the new policy’s objective, the Government said: “The overall objective of the proposal is to simplify the taxation of trading profits. This is in line with stakeholder requests to simplify this part of the tax system.

“The current year basis requires a set of rules to cover all eventualities. After the transition year in 2022 to 2023, the tax year basis would require much simpler rules to cater for the taxation of businesses.”

The new ‘tax year basis’ will start from the year 2022-23 to prepare for the start of MTD for income tax self-assessment, which is currently set to happen in April 2023.

Legislation will be also introduced as part of the reform to officially name March 31 as equivalent to April 5.

This means that businesses which draw up their accounts to March 31 will no longer have to make up apportionments of a few days to determine their profits or losses for a particular tax year.