Basis periods

Question 1

What is the tree diagram

Answer 1

Is there an accounting period ending in the tax year
Yes
Less than 12 months tax 12 months from start date
More than 12 months tax the final 12 months of the period

No
Tax actual tax year.

Remeber overlap profits YE April 11 months of O/L

Question 2

Explain the aboliiton of basis period

Answer 2

Basis period for unincorporated businesses is to be abolished. Insetad profits will be assessed on a tax year basis.

The change is to happen in 2024/2025

However tax year 2023/24 will be the transition period

Question 3

Explain the steps for the abolition of basis period

Answer 3

Step1 calculate the standard assessable profits

Step 2 calculate the transition assessable profits

Step 3
Step 2 minus overlap profits

step 4
Step 1 plus step 3

Step 5 (only if step 3 and 4 not nil or loss)
Transtion profits = lower of step 3 or 4 spread over 5 years

Step 6 = step 1 plus transtion for 1 year

attemp Q10

Question 4

Losses under the abolition of basis period

Answer 4

Any lossescreated because of the deduction of overlap profits, this amount cn be treated as terminal loss on cessation of trade at the 5th April 2024. Carried back and offset against trading profits of the last 3 years on a FIFO basis

Question 5

How to calculate the assessment of profits for the final tax year

Answer 5

Identify the final tax year of trading
Identify the penultimate tax year of trading.
Final base period = day after the end of the penultimate to the day of cessation minus any overlap profits