Owner-Managed Businesses

Basis of assessment ― normal years

Produced by Tolley
  • 21 Dec 2021 14:51

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

  • Basis of assessment ― normal years
  • Current year basis
  • Accounting date
  • Special rules

Basis of assessment ― normal years

Current year basis

The usual basis for taxation of sole trader profits is known as the ‘current year basis’. This means that in respect of a year in which the trade is continuing, which is not the year of commencement or cessation, the profits to be taxed are those relating to the accounting period ending in that year.

For example, assume a trader has a 31 December year end and makes up a set of accounts for the year ended 31 December 2018. As the accounting period ends between 6 April 2018 and 5 April 2019, the profits shown in those accounts (after adjustment for tax purposes) will be taxed in the tax year 2018/19. Putting it another way, the basis period for 2018/19 is the year ended 31 December 2018.

The Government is introducing a reform of basis periods for unincorporated trading businesses whereby businesses will be taxed on the profits arising in a tax year. The transition to the new rules will

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