Straddling and overlap Business tax HELP
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Please can someone help me ont he above for Business TAx, i cannot get my head around the 2nd year and overlaps. I can calc the first year but i cannot understand WHY you have to pay tax twice inthe second year. Has some one got a simple explanation as i cannot work it and never have been able to after year 1???????????????????????????????
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Straddling and overlap Business tax HELP
<BR>I have put an example below, hope this helps<BR><BR>Started business 01/10/02.<BR><BR>First basis period (for tax year 2002/2003) would be 01/10/02 - 05/04/04 (i.e 6months)<BR>Second period (Tax Year 2003/2004) would be 01/10/02 - 30/09/03. (12 months)<BR>Third period (Tax Year 2004/2005) would be 01/10/03 - 30/09/04 (12 months)<BR><BR>Whatever profits you included on your tax return for 2002/2003 would be carried forward year on year as "Overlap Profits" and would only be dealt with when the business ceases.<BR><BR>You would then include this figure on the tax form for the final year of trading.<BR><BR>Hope this helps!<BR><BR>0 -
Straddling and overlap Business tax HELP
Thank you. What confuses me is the 2nd year. Must we always do the 2nd year back to the start date of the business starting???0 -
Straddling and overlap Business tax HELP
<BR>No, only if the accounting period is less than twelve months and there is an AP in the second tax year. If there is a full AP ending in the next tax year, that is the second period used (say a trader starts 30 Sept and wants his AP to run to 31st Dec, for example). If not, it is April to April and then the year up to end of AP. This was introduced by IR to ensure each taxpayer gets assessed each tax year, so altho sole traders can have any AP they like, they are discouraged from having an initial long period because they will find they suffer the most overlap tax.<BR><BR>The only way to get the hang of it is to practice a few examples0