ACCA Taxation (TX-UK) Trading Profit Basis Periods Introduction

Ffahim2317y ago

Hi, In the first lecture on chapter 6 on UK tax, there is an example used at the 20 minute mark. The tutor says that if trading commenced on 1.1.2017 and accounts were prepared to 30.9.17. My question is why would someone prepare their accounts to 30.9.17? which is only 9 months. Wouldn't they prepare it to the end of the year instead? Thank you in advance.

AAli7y ago#1

There can be several reasons, for example they may want their accounting period from Oct to Sep, but its not the purpose of this course to know those reasons. You don't need to worry about how or why the accounting period differs than 12 months. What you do need to know is how to calculate taxable trading income in that period.

Ffahim2317y ago#2

Hi, Thanks. I know its not being assessed but I wanted to know to get a better idea of why the basis period is the way it is. could you give me one good example of why someone would do this? thanks

Iibshell17y ago#3

I think sometimes it may be to fall in line with regulatory requirements. For example, in some countries, commercial banks must have their year end on 31st Dec each year. So if a company started trading during the same year, they would be required to prepare accounts for the end of the year.

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