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Dear Sir,
I have an issue with the following question:
Christine starts to trade on 1 Dec 2016. Her monthly profits are £1,000 for the first 7 months, and £2,000 thereafter. Show the taxable profits for the first 3 tax years with each of the following accounting dates (in all cases starting with a period of account of less than 12 months).(a) 31 March
Year Basis period Taxable profits
£
2016/17 1.12.16 – 5.4.17 4,000
2017/18 1.4.17 – 31.3.18 21,000
2018/19 1.4.18 – 31.3.19 24,000
This is the answer according to BPP.i do not understand why they do not calculate profits from 1.12.16 to 31.3.18 (long period) which equals to 25000 and then apportioned as follows
2016/ 2017 1.12.16-5.4.17 4/16 x 25000 = 6250
2017/2018 1.4.17-31.3.18 12/16 x 25000 = 18750.I do not understand the methodology by BPP. Can you help me please?
The answer is written in the question – it clearly states as you have written above:
“(in all cases starting with a period of account of LESS than 12 months)”Dear Sir,
If it is less than 12 months, then why do they take the last 12 months in the 2nd year instead of the first 12 months.Thanks.
The basis of assessment in the 2nd tax year is NOT the last 12 months of a long opening period – as the question states there is NO long opening period.
The basis of assessment used is CYB which here will be the profits of the accounting YEAR ended 31 March 2018 – we only use the first 12 months when the accounting period that ends in the tax year is less than 12 months – here we have an accounting year ended in the tax year so the normal CYB basis is used.
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