Change of accounting date

Key points

• Income tax is charged on the results of an unincorporated business.
• The current year basis rules allocate the profits from a 12-month set of accounts to the tax year in which they end.
• Special rules apply when the period is not a 12-month period.

If a sole trader draws up a set of accounts that are not 12 months long it will be necessary to use special rules to work out what profits to allocate to the tax years involved. This is a topic that is regularly tested in both the ATT and CTA examinations. Although the government has announced a review of basis period the existing rules will continue to be relevant for some time and therefore this article does not cover any of the proposed changes.

If the accounts are either the first or last set of accounts the opening or closing year rules should...