Trading Profits - basis of assessment

Question 1

What does the tax year basis rule tell us?

Answer 1

Tax the profits from the tax year

Question 2

When is the assessable period for a new business?

Answer 2

From date of commencement to 5th April

Question 3

What is done to profits when the financial year does not align with the tax year?

Answer 3

Apportion based on relevant periods

Question 4

What is the late accounting date rule?

Answer 4

If the year end is very close to end of tax year, businesses can act like year end is 5th April

Question 5

What can be done if trading commences shortly before the beginning of the tax year?

Answer 5

Profit calculated as if trade started on 6th April

Question 6

What is the assessable period when a person ceases trading?

Answer 6

6th April till cease date

Question 7

What are the steps to calculate a partner’s trading profit?

Answer 7

1) Adjust partnership profit
2) Calculate capital allowances
3) 2 - 1
4) Allocate share of profit to each partner
5) Apply tax yr rules for each tax return