Business Tax Question

Doing some business tax homework :001_smile: and finding it hard. I am doing basis periods for individuals and partnerships.

This is the information…

Alan started trading on 1 February 2007. He makes up his accounts to 31 December each year. The profits were calculated as;

Period to 31 December 2007 £33000
Year to 31 December 2008 £40500
Year to 31 December 2009 £45000

And this is the question…

a) The tax year in which he started trading was
05-06 06-07 07-08 08-09

I chose 06-07

b) His taxable profits in his first tax year of trading were
£2750 £3000 £5500 £6000

I chose £6000

My working…

33000/11 = 3000 x 2 (Feb/Mar) =6000

c) His taxable profits in his second tax year of trading were
£33000 £36375 £40500 £45000

My answer was £37125

My working…

33000/11 = 3000 x 9 = 27000
40500/12 = 3375 x 3 = 10125

d) His taxable profits in his third tax year of trading were
£33000 £36375 £40500 £45000

My answer was £41625

My working…

40500/12 = 3375 x 9 =30375
45000/12 = 3750 x 3 = 11250

e) His overlap profits were £?

I’m not sure about this one and seem so my answers above didn’t match I wasn’t sure what to do.

f) His overlap profits are deducted
from his first year profits
from the profits in the third year of trading
from the profits in the final year of trading
from any profits chosen by Alan

I chose from profits in the final year of trading

I appreciate any help that anyone can offer. :001_smile:

Thank you in advance.

Comments

  • steveadams48
    steveadams48 Registered Posts: 13 Regular contributor ⭐ ? ⭐
    Hi Jade

    I have my BTX exam on Weds so this is good practice, I think it is:

    Alan started trading on 1 February 2007. He makes up his accounts to 31 December each year. The profits were calculated as;

    Period to 31 December 2007 £33000
    Year to 31 December 2008 £40500
    Year to 31 December 2009 £45000


    a) The tax year in which he started trading was
    05-06 06-07 07-08 08-09

    06-07 - First year finishes at end of tax year on 5 April 2007.

    b) His taxable profits in his first tax year of trading were
    £2750 £3000 £5500 £6000

    1 February 2007 to 5 April 2007:

    33000/11 = 3000 x 2 (Feb/Mar) =6000

    c) His taxable profits in his second tax year of trading were
    £33000 £36375 £40500 £45000

    2007/2008:
    Accounts end December 2007 = 11 months, therefore extend to 12 months:
    1 February 2007 to 31 January 2008:
    11 months to 31 December = £33,000
    + 31 Jan 2008
    (Yr to Dec 2008 £40500/12) = £ 3,375
    Total £36,375

    d) His taxable profits in his third tax year of trading were
    £33000 £36375 £40500 £45000

    2008/09:
    1 January 2008 to 31 December 2009 = £40,500

    e) His overlap profits were:
    1 Feb 07 - 5 April 2007 = £6,000
    + January 2008 = £3,375
    Total £9,375

    This can be checked by:

    Period to 31 December 2007 £33,000
    Year to 31 December 2008 £40,500
    Total £73,500

    Tax paid:
    2006/07 £ 6,000
    2007/08 £36,375
    2008/09 £40,500
    Total £82,875

    Difference (£82,875 - £73,500)
    = £9,375


    f) His overlap profits are deducted
    from his first year profits
    from the profits in the third year of trading
    from the profits in the final year of trading
    from any profits chosen by Alan

    I chose from profits in the final year of trading - Correct

    Steve
  • Jade95
    Jade95 Registered Posts: 50 ? ? ?
    Thank you Steve

    That explains it very clearly, i am glad i was able to give you a bit of revision. :001_smile:

    Jade
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