Setting the year end/base period etc - help?

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT member discussion
Hi

I've been reading over my partner's tax return and I'm a tad baffled:

He began trading January 2005.

1. Can he choose when he wants his year end to be?
1.1 If so, can it be so that the first year end is longer than 12 months, or must it always be 12 months or less? ~(e.g. Say he wants his year end to be 31 March, can he end the first year, 31 March 2006, or must it be 31 March 2005 with only 3 months of accounts to date?)

2. What is the 'Base Period'?

3. If he chooses to have his year end at say 31 December, does that mean that Jan - Mar profits will be taxed under one year's tax rules, and then Apr - Dec will be taxed under that years rules?
3.1 If this is the case, can you just work out an avergae profit for each month, or do you need to work out profits to Mar, and then profits to Dec?

Thank you so much for any assistance, I've been reading the HMR&C site all day, and I've gotten no where except brainfogdom! I've phoned them but they say the technical people are always busy!

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Setting the year end/base period etc - help?

    Hi there

    Is your partner trading as a ltd co or sole trader? -it makes a difference.

    Claudia
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Setting the year end/base period etc - help?

    Thank you.

    He is a sole trader.

    I think I may have just got the amswer to this one from HMRC; they say that he should choose his yr end to be 5th april and then ther is no overlapping between tax years and he won't be taxed twice. Does that sound about right?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Setting the year end/base period etc - help?

    It is what the Revenue want everyone to do - it will however differ for every case and what profits/losses there are at the beginning. Yes, there will be overlap profit if there is not a 05.04 year end, but for some cases it might work to the clients advantage to have a different date - particularly if they have a seasonal trade.

    Also bear in mind that if Carter gets his way it might well be beneficial NOT to have a 05.04 year end.

    Horses for courses I am afraid - you need to look at everyone individually.

    Claudia
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Setting the year end/base period etc - help?
    claudialowe wrote:

    Also bear in mind that if Carter gets his way it might well be beneficial NOT to have a 05.04 year end.

    :evil: :evil: :evil:
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Setting the year end/base period etc - help?

    OK, forgive my ignorance but...

    Why would it be better to not have an 05.04 end if the work is seasonal?

    And who is Carter, and what is he proposing?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Setting the year end/base period etc - help?

    Dean - Oh how I agree!!!!!!

    Anna - look at the home page!

    Claudia
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Setting the year end/base period etc - help?

    OK so Carter is proposing we get the tax returns in by september as oppose to january, but why whould that make it so that the year ends are beter off not being 05.04.?

    And how ouwld it help seasonal businesses t nothave th yr end 05.04.?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Setting the year end/base period etc - help?

    Ok, lets say your business is selling ice cream to the public and your year end is 31 August.

    You would think that your business is going to be most profitable during the summer months and least profitable during the winter months.

    So having the above year end (31 Aug) you are getting your most profitable months into your accounts so therefore your taxable profits are going to be higher.

    You would want to set your year end at say 31 December when you would be making some losses to offset against the summer months.

    Hope that helps.

    Regards

    Dean

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