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SAM HART goes back to first principles with a look at accounting dates and their taxation effects
KEY POINTS
- Advantages and disadvantages of early or late accounting dates.
- Basis periods and tax years.
- The rules for the first and subsequent years of trading.
- Beware high tax liabilities at cessation.
- Scenarios and examples.
We have now been on the current year basis of assessment for 13 complete tax years but the rules can be complicated and it is always worth revisiting the basic principles. The assessment rules are set out in ITTOIA 2005 and all statutory references in this article are to that Act unless specified otherwise.
When starting a business a sole trader or partnership may choose whatever accounting date they wish to draw their accounts up to and the first period may be longer or shorter than 12 months. Accounts...
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