Basis of Assessment

Question 1

What are the 3 conditions that need to be satisfied for a change of accounting date?

Answer 1

1. HMRC must be notified on or before 31st January following the tax year in which the change is made
2. The first accounts to the new accounting date must not exceed 18 months
3. There must not have been another change of accounting date in the last 5 years unless for a genuine commercial reason

Question 2

Change of accounting date

What is the basis of assessment if the new date is EARLIER in the tax year than the old one?

Answer 2

The 12 months to the new accounting date

This will create overlap profits

Question 3

Change of accounting date

What is the basis of assessment if the new date is LATER in the tax year than the old one?

Answer 3

The period ending with the new accounting date

Overlap profits from the commencement of trade are offset in order to reduce the number of months taxed to 12