Basis periods

Question 1

Basis period - basic rule

Answer 1

Tax the profits of the accounting period which ends in the fiscal year

Try to tax 12 months profits (not always possible)

Question 2

Opening years - First tax year

Answer 2

The ONLY year that is LESS than 12 months

From the date of commencement - following 5th April

Question 3

Second tax year - period of account ending in tax year is less than 12 months long

Answer 3

First 12 months of trading

Question 4

Second tax year -period of account ending in tax year is 12 months long

Answer 4

That 12 month period of account

Question 5

Second tax year - period of account ending in tax year

is more than 12 months long

Answer 5

12 months to the end of the period of account ending in the second tax year

Question 6

Second tax year - no period of account ending in tax year

Answer 6

6th April - 5th April

Question 7

Summary of opening year rules

Answer 7

Y1 - Actual (start date - 5th April)

Y2 - Is there an accounting period ending in the tax year? If not 6 April - 5 April

If yes but less than 12m - first 12 months trading
If yes & 12 months - tax the AP
If yes but more than 12 months - 12 months to the a/c date

Question 8

Year 3

Answer 8

Usually CYB but if not tax 12 months to a/c date

Question 9

Closing years - Final tax year

Answer 9

The tax year in which the business ceases to trade

The basis period is from the end of the basis period for the penultimate tax year to the date of cessation. In this year, relief is given for overlap profits by deducting overlap from taxable trading profits.