Basis Periods

Question 1

What happens in tax year 1?

Answer 1

Actual profits from commencement of trade to following 5 April

Question 2

No accounting period which ends in tax year 2?

Answer 2

Assess the actual profits in tax year 2

Question 3

Accounting period less than 12 months in tax year 2?

Answer 3

Assess profits for the first 12 months of trading

Question 4

Accounting period greater than 12 months in tax year 2?

Answer 4

Assess profits for 12 months to the accounting period end date ending in year 2

Question 5

What happens in tax year 3?

Answer 5

Assess profits for 12 months to the accounting period end date ending in year 3

Question 6

What are overlap profits?

Answer 6

When profits fall into more than one basis period

Question 7

When is overlap relief available?

Answer 7

Cessation of trading

Question 8

What happens in cessation of trading?

Answer 8

Allowing the overlap profit to be deducted in the final tax year of assessment