AAT Practice Assessment 2 Task 1B question

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VijiVijins
VijiVijins Registered Posts: 9
in Business Tax
Hello guys,

Wonder if you could help with this task please. Do you know how do we get 32370 answer


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  • PeterC
    PeterC Registered, Tutor Posts: 245 Dedicated contributor 🦉
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    The basis period for 2019/2020 was the year ended 30 April 2019
    Therefore
    The basis period for 2020/21 is from 1 May 2019 to 31 March 2021 ie. 23 months
    The taxable income for the basis period is 22,770 + 18,400 = £41,170
    Because this is >12 months, we can claim overlap relief
    Because it is 11 months longer than 12 months, we can claim all 11 months of overlap profit ie. £8,800
    Therefore
    Taxable income = 41,170 - 8,800 = £32,370


  • VijiVijins
    VijiVijins Registered Posts: 9
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    That's great Peter, many thanks!
  • PeterC
    PeterC Registered, Tutor Posts: 245 Dedicated contributor 🦉
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    You're welcome
  • RJS
    RJS Registered Posts: 2 New contributor 🐸
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    Hi, please could I have some further assistance with this question:

    In the reference material it states the first accounts ending in the new date must not exceed 18 months in length. With that being the case how can the basis period be 23 months long?

    Thanks and apologies if I am missing something obvious

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