7: Basis of Assessment

Question 1

How does apportionment work for commencement of trade?

Answer 1

Profits must be apportioned from the date the business starts to the end of the tax year - this is the tax year basis
- probably less than 12 months

If a trade started between 1 and 5 of April, just treat it as if it started in the following year

Question 2

What are the late date accounting rules?

Answer 2

If they prepare their accounts to end between:

31st March - 4th April

Treat it as if it ends on the 5th April!

Any other date: apportion.

Question 3

What happens with a business ceasing to trade in terms of tax year?

Answer 3

The sole trader will be taxed from 6 April to the date of cessation

Question 4

What is a partnership?

Answer 4

A body of persons carrying on business together with a view to profit: effectively a group of some traders acting together.

Each partner is taxed as an individual on their share of the profit

Question 5

What are the steps to allocating profit in a partnership?

Answer 5

1. Share tax adjusted profit between partners
   - allocate ‘salary’
   - assign ‘interest on capital’
   - share remaining profit using Profit Sharing Ratio
2. Tax each partner individually using the tax year basis

Question 6

What is the partnership tax return rule?

Answer 6

Exactly the fucking same as for individual self-assessment tax returns!

Exactly the same return dates and penalties.

Question 7

What’s the most common way a first account period starts?

Answer 7

Opening an interest-bearing account

Being incorporated is NOT!