LECTURE 4: Basis of Assessment

Question 1

When does a tax year run from?

Answer 1

6 April - 5 April

E.g. tax year 17/18 runs from 6 April 2017 - 5 April 2018

i.e. profits assessed in a tax year are those of the period for accounts purposes which ends in the tax year.

Question 2

What does a current year basis apply to?

Answer 2

Income from self-employment

Question 3

COMMENCEMENT

Answer 3

Tax year 1 (tax year which business commences)

Date of commencement - 5 April at end of tax year 1

Question 4

How is tax year 2 determined?

Answer 4

Does the business prepare accounts to a date falling in this tax year?
NO
Tax 6 April - 5th April of this second tax year.
YES
Has the business been going for at least 12 months to this date?
NO
Take the first 12 months of trading
YES
Take the 12 months to this accounting date.

Question 5

Tac year 3, etc.

Answer 5

Profits for the 12 months to the accounting date (year end) falling in the current tax year.

Question 6

CESSATION OF BUSINESS

Answer 6

The final tax year of a business is the tax year during which trade ceases.

The basis period for this final tax year is the period

• from the end of the basis period for the 2nd last tax year
• to the date of cessation

Profits will then be adjusted for overlap arising on commencement.