- January 20, 2020 at 2:05 pm
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?January 20, 2020 at 3:45 pm
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)”January 20, 2020 at 4:21 pm
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.January 28, 2020 at 10:03 am
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.February 1, 2020 at 5:31 pm
i have now understood.
Thank you Sir.
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