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Could you pls explain why Fyles trading income for tax year 2010/11 is 4/12 of the whole years profits when he only joined as a partner on 1/12/10 and the company’s year runs 1/10 – 30/9? I’m getting in a bit of a muddle. I apportioned the first 2 months profits to Bayle (216 000 x 2/12 = 36 000) then the balance remaining for the year (216 000 – 36 000 = 180 000) split 80% Bayle and 20% Fyle (36 000). For his first years assessable income (6.4.10 – 5.4.11) i took his income from 1.12.10 to 5.4.11 as 36 000/10months (dec – sept) x 4 months ( 1st dec to 5 apr) = oh its 14 400 this time ( I x by 6 last time in error!!)…. still….. i cant see how the specimen answer was calculated so easily ?? Am i just being dense and over-complicating things?… I’m even more puzzled now that my answer is the same as the specimen answer when the specimen answer used 4/12 of the whole years profits?… i would be really grateful if you could give a simple explanation as I know time will be limited in the exam and if i could understand how this was calculated so simply I will save myself valuable time. many thanks, Sally
This is because the amount you apportion to Fyles is then subject to the opening year rules, He commenced in 2010/11 and his trading profit will be profits from the date of commencement of trade to 5/4/11. This is 4 months out of profit for his first accounting period being 1/12/10 to 30/9/11. So 4/10 x 36000 =14400
Hope this helps
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