Commentary

B8.102 Basis periods—early years of trading

Business tax
Business tax | Commentary

B8.102 Basis periods—early years of trading

Business tax | Commentary

B8.102 Basis periods—early years of trading

There are special basis periods for the early years of trading (ie the first two, or sometimes three, years). After that, the basis period rules for continuing trades apply, as detailed in B8.101A.

In summary the early year basis periods are as follows1:

  1.  

    •     first tax year — from the date of commencement of trade to the following 5 April

  2.  

    •     second tax year — the rules are more complex, to take into account the various scenarios that may apply, as follows:

    1.  

      •     if the accounting period ends 12 months or more after starting to trade — the period of 12 months ending on the accounting date in the second tax year

    2.  

      •     if the accounting period ends less than 12 months after starting to trade — the first 12 months of trading

    3.  

      •     if there is no accounting date in the second tax year — the fiscal tax year (6 April to 5 April), unless the change of accounting date rules apply (see B8.101A at Change of accounting date and basis periods in continuing trade)

Where the basis period for a year of assessment does not coincide with a period for which accounts are made up, the profits/losses from the accounts periods are apportioned and/or aggregated as necessary; see B8.101A2.

First tax year

For the first tax year in which a person commences a trade (B1.601) the basis period begins with the date of commencement and ends on the following 5 April3. It

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