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hi.
i wd imagine that a company pays taxes every year … so when we are looking at the final year in which trading stops, why are there periods that have not been assessed?
I assume here that you are referring to the bases of assessment that apply in closing years for the UNINCORPORATED trader NOT a company as you refer to in your question!! A company would not indeed face this problem as corporation tax computations are done for the chargeable accounting periods of the company so every profit period of a company is taxed just once from start to end of trading by the company!
If you are referring to the approach we take in establishing the assessments in the closing years then there are NO profits which escape tax – ALL profits will be charged to tax!!
What we do to determine the assessment in the final tax year is to include any profits that have not YET been assessed in an earlier tax year and these are NOW all assessed within the final tax year less any overlap profits that arose in the opening years.
The effect of this overall therefore is that all profits will have been taxed once over the lifetime of the business.hmmm..ok…. so what u r saying that there is a possibility that a sole trader may not have been assessed a few years before cessation of business?
No! The taxpayer will have been assessed in every tax year from the tax year in which he started to trade but because we only tax the trader until the tax year in which he ceases trading, any profits that have not YET been charged up to the preceding tax year must now be assessed in this final year to ensure that all profits of the business have indeed been charged to tax – there are no gaps.
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