Basis of assessment ― closing years

Produced by Tolley

The following Owner-Managed Businesses guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Basis of assessment ― closing years
  • The closing year rules
  • Overlap profits
  • Computing overlap profit
  • Checking overlap profit
  • Transitional overlap profit

The rules on closing years apply to unincorporated businesses. These rules apply equally to businesses using the simplified cash basis. See the Eligibility for the simplified cash basis guidance note.

See also Simon’s Taxes B4.105.

The closing year rules

These rules apply when a trader ceases to trade.

Closing year rules are much simpler than the opening year rules. In the penultimate year (ie the tax year prior to the cessation of the trade), the normal current year basis rules apply, ie taxing profits of the 12-month accounting period ending in the penultimate tax year.

In the final tax year, the profits arising in the period from the day after the previous basis period ended to the date of cessation are taxed. In other words, on cessation of trade, any remaining profits are taxed, making sure there are no gaps or overlaps in the profits that are taxed. Overlap profit brought

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