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A look at basis periods.
KEY POINTS
- Apportioning profits in the first year of a business.
- Rules for changing the accounting date.
- Overlap relief may increase losses on cessation of the trade.
- Capital allowances basis periods follow the accounting ones.
For individuals and partnerships in business a fundamental concern is when their trading profits are taxable. In most years this is straightforward but for the first and final years of a trade or for years involving a change of accounting date things become more complex.
Once a basis period is identified the taxable profit or loss may be allocated to it on a time basis from the tax computations.
Often the easiest way to deal with basis periods is to draw a diagram to help visualise the overlap periods and make sure...
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