Basis periods 2nd Year -Tax

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Hi,
Would anyone be able to tell me how to work out the 2nd year on basis periods as I have notes but am getting very confused!
many thanks!

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Basis periods 2nd Year -Tax

    The second period is the one after the first :lol:

    Well, it was difficult to answer with out any dates :D

    Put down a date scenario and i'll help you out.

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Basis periods 2nd Year -Tax

    :lol:
    I did not really mean anything specific, just what the different rules were as am getting confused learning it!
    Thanks!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Basis periods 2nd Year -Tax

    The only way I can try and explain it then is to say that all you have to do is split the accounting year end within the date range of the tax year end (5th April).

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Basis periods 2nd Year -Tax

    In the first tax year you use the start of trade until the end of the tax year (the only basis period that can be less than 12 months other than year of cessation)

    If there is no accounting date in the second tax year then use the tax year itself (ie 06.04.XX - 05.04.xx) Then in the third tax year use the 12 months to the date of accounts in the third tax year.

    If there is an accounting date in the second tax year then you have two options:
    1) if the accounting period ending is 12 months or longer then use the 12 months leading to the date of accounts.
    2) if the accounting period ending is less than 12 months use the first 12 months of trade.
    Then in the third tax year use the company's accounting periods.

    This is what my handout says, but it is much easier to show with examples.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Basis periods 2nd Year -Tax

    Hi,
    Thanks for your help, I was just wondering if I could give an example as I am getting confused about the accounting period.
    Pete started a business on November 1st 2001, making up accounts on October 31st each year.
    The profits were:
    Year ended 31 oct 2002 18,000
    Year ended 31 oct 2003 37,500
    Year ended 31 oct 2004 44,000

    I understand the 1st year would be 2001/2002 1.11.01 - 5.4.02 5/12x18000 = 7,500
    But how do I work out the second year, I have my notes but am having a mental block with the second year.
    Any help would be appreciated!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Basis periods 2nd Year -Tax

    Still struggling with basis periods, nightmare! if anyone can help would much appreciate it! Good luck to everyone taking exams next week!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Basis periods 2nd Year -Tax

    The way I understand it is as follows:

    2001/2002
    01 Nov 01 to 5 Apr 02
    18000 x 5/12 = 7500

    2002/2003
    18,000

    2003/2004
    37,500

    2004/2005
    44,000

    Therefore you would have overlapping profits of £7500

    That's how I've done it in practice questions in class and the tutor has marked me correct

    If anyone could confirm otherwise, I'd be very grateful!

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