Accounting period March 2011-12

katsutlieff

I am hoping one of you wonderful MIP could help me with this as I getting myself all tied up in knots.

My brother set up in business in at the beginning of March 2011, so his accounting period will be March to March. I am struggling to get my head around when his first tax return is due.

Anyone who can explain this to me? I would be very grateful

Jmann

If you give start date and what date year end your brother wants, then it would be easy to reply.

Ellabobbin

Is he a sole trader or a ltd company? This will also affect the date.

katsutlieff

Many thanks the two of you for getting back to me. I have just being down to the workshop and taken away all his paperwork. He actually took over the workshop lease on 18th April so we are okay in terms of needing to file this year.

He is a sole trader but was previously in a partnership prior to going alone so will to look at and file for 2011


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Monsoon

The easiest thing to do if you are not confident with basis periods is to give him a year end of 31st March.

Therefore, March 2011 in the 2010-11 return, and then 01/04/2011- 31/03/2012 in the 2011-12 return and so on.

If you are confident with basis periods (i.e. a non-tax year year end) then you can give him whatever year end he likes.

katsutlieff

Thank you Monsoon. We briefly touched on this in PTX but didn't go into much detail.

He is a brilliant at what he does, but has a terrible business sense, just trying to get his books into some sort of order

Monsoon

Just run with a 31st March year end, then. Much, much easier for all involved.

jamesm96

Monsoon wrote: »

Just run with a 31st March year end, then. Much, much easier for all involved.

Yeah I agree. In fact, I can't really see any compelling reason to use a year-end other then 31 March for a Sole Trader... I can only see that it results in overlap tax which the proprietor won't get back for years, until he ceases to trade and gets the overlap relief. What is the point... have I missed something?

katsutlieff

I can see I will need to look into this in more detail. I don't entirely see why a tax year ending 31st is preferable over any other date including 5 April. Can anyone suggest where I could find additional reading

jamesm96

katsutlieff wrote: »

I can see I will need to look into this in more detail. I don't entirely see why a tax year ending 31st is preferable over any other date including 5 April. Can anyone suggest where I could find additional reading

Have a look at this helpsheet at the info under the section "Your basis period for 2010–11":
http://www.hmrc.gov.uk/helpsheets/hs222.pdf

Basically, if your year-end is anything other the 31 March, then you can't just use the year-end accounting profit for the tax return. Working out what profit to tax is a bit complicated, and you'll end up paying tax on some of the profits twice.

Monsoon

I should also point out that 31st March = 5th April i.e. standard tax year. It's an HMRC concession because it can be easier to run in whole months, so they allow 31st March to be the same treatment as 5th April.

And yes, overlap profits are a pain and in my opinion the potential tax advantages at the beginning can be outweighed by the complexity and the variables on cessation, so I'd go 31st March or 5th April (no real difference).

JodieR

Yip, I usually go with 31 March too, apart from when I take on clients who already have another year end and are happy to continue that way.
The only client I've chosen to have a year end of 31 December is a gardener as Jan/Feb/March are very quiet months for him so he gets his records drawn up in Jan and i do his accounts in Feb/March and then in April when it kicks off again for both of us all I have to do is file his tax return.