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How is the length of the period of account calculated?
In order to calculate the taxable profits, if we are given the monthly profit? Do we have to calculate first the profits for each period of account and then the taxable profit for each tax year based on those profits?
Thank you.
Pulet
I assume you are referring to income tax assessments and not corporation tax.
The dates of the period of account will be given.
You will indeed determine the profits for each period of account, if not already given, and then use the bases of assessment for each tax year to establish the assessment for each such tax year
Thank you very much for your prompt response.
Yes, I am referring to income tax assessments.
I think that I did not formulate the first question properly. I have difficulties to determine the length of the period of account/accounting period in order to establish the basis period for the second tax year. My understanding is as follows:
If trade starts the 1 January 2014 and accounts are prepared to the 30 April, then:
Period of account/accounting period Tax year
Year 1 1.1.14-30.04.14 2013/2014
Year 2 1.5.14-30.4.15 2014/2015
Year 3 1.5.15-30.4.16 2015/2016
Second tax year: Is there a period of account which ends in the 2nd tax year? Yes (1.5.14-30.4.15).
How long is that period? 1.5.14-30.3.15 therefore, it is 11 months long < 12 months, so the basis period for year 2 is 1.1.14-31.12.14 (first 12 months of trade).Is this reasoning correct?
Thank you.
Regards
Pulet
I regret that your reasoning is not correct and there is confusion between the periods of account giving rise to the adjusted trading profit and how we then assess those profits by reference to the tax years of assessment and the bases of assessment that apply for each such tax year. If you have not yet watched the relevant lecture and worked through the OT course notes I would ask you to do so in order to overcome these fundamental misunderstandings and contact me again when this is done and hopefully your problems are resolved.
I have watched the relevant lecture again. This is my conclusion:
If trade starts on 1.01.2014 and accounts are prepared:
to the 30.04.2015
y/e 30.04.2016
y/e 30.04.2017
1st tax year: 2013/2014
Period of account Ends Tax year Length
1.1.14-30.04.15 2015/2016 16 months
1.5.15-30.04.16 2016/2017
1.5.16-30.04.17 2017/2018
Tax year Basis period
13/14 1.01.14-05.04.14 (Actual)
14/15 (Second tax year): Is there a period of account, which ends in the 2nd tax year? No, there isn’t. Therefore, basis period 06.04.14-05.04.15 (Actual)
15/16 (Third tax year): Basis period: 12 months to the period of account ending in the third tax year.
01.05.14-30.04.15
Yes those basis periods are correct for the first 3 tax years and CYB would then apply in the 4th tax year = 16/17 y/e 30.04.16
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