Basis of assessment ― opening years

Produced by Tolley
  • (Updated for Autumn Budget 2021)

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

  • Basis of assessment ― opening years
  • When has the trade commenced?
  • The first year
  • The second year
  • Computing the amounts to tax
  • The third year

Basis of assessment ― opening years

When has the trade commenced?

A trade commences when the main trading activity starts. There may have been earlier activity in preparation to trade, but this is pre-commencement work. For example, a new trader may hire some staff, acquire some premises and set up supplier and customer contracts before the actual manufacturing activity commences. The commencement date for tax purposes of this trade is the date that the actual activity began, ie the date that the manufacturing started. This rule was given in the case of the Birmingham and District Cattle By-Product Company.

In determining when somebody starts trading, you must look for the main activity. For example, a shopkeeper will start to trade on the day he first opens his doors to the public, or an accountant may start to trade when he is first available to accept work. The actual commencement date will depend on the facts in each individual case. For HMRC guidance on commencement, see BIM80505 onwards.

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, and therefore the opening year rules will be abolished. The transition to the new rules will take place in 2023/24, and the new rules will come into force from 6 April 2024, see the

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