Basis Of Assessment Rules For Unincorporated Businesses Ch5

Question 1

What are the basis of assessment rules for unincorporated business? 2 types

Answer 1

Previous rules and basis period reform

Question 2

What are the previous rules under basis of assessment

Answer 2

1. Prior to tax year 23/24, UB were taxed on the CY basis, with the taxable profits for an accounting period taxed in the year in which the accounting period ended -

eg if the business had an acc ye of 31 dec, the taxable profits for the year ended 31 dec 22 would have been taxed in tax year 22/23

2. Special opening year basis period rules were used to determine the assessable profits for the initial tax years of trading for an unincorporated business, which led to overlap profits being created if the business accounting year end was not 5tb April

Question 3

What is the basis period reform under assessment rules 2 then 2

Answer 3

1.from tax year 24/25 a simpler basis of assessment will be used whereby the profits arising in the tax year (6 April - 5 April) will be taxed (time apportion if acc ye not same as tax year end)

2. Tax year 23/24 will be a transitional year where any profits prior to 6 April 24 will be taxed

• if a business has a non 5th April acc year end this will lead to more than 12 months of profit being taxed in 23/24
• any additional profits taxed due to the catch up will be spread over the next 5 tax years

Question 4

ATX tips for this

Answer 4

1. The calc of transitional profits for 23/24 not be examined thought should be aware of the catch up taxation of profit in 23/24 and the spreading of these profits over the next 5 years
2. UB will always have a 5 April accounting ye in q requiring calc of assessable profits
3. In q where business acc year is not same as tax year students will be given assessable profits for the tax year in q