Chapter 6 - Trading income for unincorporated businesses

Question 1

What is the trading allowance?

Answer 1

£1,000

Where if trading receipts are less than or equal to £1,000, they are not taxable.

Question 2

What are the process for basis periods?

Answer 2

1st FY (Commencement) - Start date -> following 5 April.
2nd FY - accounting period ending in this FY?
YES - How long is it?
- <12Ms - Tax first 12 Ms of trading from commencement.
- =12 Ms - CYB
- >12Ms - Tax the 12Ms to the accounting period.
3rd FY - repeat these questions if not yet on CYB.

Question 3

Closing Year rules?

Answer 3

1) Identify final tax year (year of cessation)
2) Tax all prior accounting periods as normal
3) All profits not yet taxed x
Less overlap profits (x)

Question 4

What are the change of accounting year rules?

Answer 4

Results in a period of account that’s not 12Ms long

1) Identify tax year of change
2) Tax years prior to YOC, calculate taxable trading profits as normal
3) Tax years after YOC, tax profits for 12Ms ending on new accounting YE.
4) Identify untaxed gap:
- Gap >12Ms - tax profits in the gap and deduct overlap profits to leave 12Ms worth
- Gap <12Ms - tax 12Ms ending on new year end date (Create overlap profits)

Question 5

What is the Yoc?

Answer 5

Earlier of:
FY where date stopped using old year end
FY where date of new year end started