Business Tax - Basis Period

Jayney

Hi I wonder if anyone can help with a query that I have about basis period. I find the illustrations in Osborne book easy to follow, but come unstuck when I do the questions, so think I don't fully understand the concept.

Can someone please show me how to work out the taxable profits for 1st, 2nd & 3rd year.

The question states that trading started on 1st November 2012 & accounts are made up to the 31st each year.

the profits calculated are:

Period to 31st December 2012 £16,000
Year to 31st December 2013 £108,000
Year to 31st December 2014 £92,000

Need to also know how to work out overlap profits.

Answer is first year £43,000, 2nd year £108,000 & 3rd year £92,000 & overlap profit £27,000

If someone can explain the process, I would be very grateful.

Many thanks

Jayne

ncraggs

In the first year you would tax from the start of the business to the following 5th of April. So this will be the period up to 31/12/12 £16,000 plus 3 months of the period to 31/12/13, which is £108,000 x 3/12 = £27,000. So this plus the £16,000 is £43,000.

You are then on current year basis, where you have a 12 month period ending in each accounting year. Note you have overlap profits of £27,000.

Jayney

many thanks for explaining this - find it rather confusing.