Tax Return Base Period

Tax Return Base Period

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Hi there, 

I am bit confused about how the accounting base period works. Can someone please help me to complete my tax return. I have started trading from 01/01/2012 and in order to submit my 2011/12 tax return I have produced a draft profit and Loss and balance sheet (schedule) from 01/01/2012 - 05/04/2012 and submitted my tax return.

Now I have produced a final account for full 12 months (from 01/01/2012 - 31/12/2013). How do I bring this figure into my 2012/13 tax return?  Do I need to proportion my P&L and balance sheet accordingly? Do I need to produce another set of draft account from 01/01/2013 - 05/04/2013 and include that in my tax return? Please help!!

Thank you in advance

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Euan's picture
By Euan MacLennan
04th Jan 2014 13:41

Second year

The basis of assessment for the second tax year of self-employment is the profits for the 12 months up to the accounting date falling in that second year.  In your case, that simply means that you would include in your 2012/13 tax return the profits in your 'final account' for the year to 31/12/2012 (I assume that is what you meant rather than 31/12/2013).

If you stated on your 2011/12 tax return that the figures were estimated, you must file an amendment to the 2011/12 return by 31st January 2014 (and even if not, you might choose to do so if the figures work out less) based on a time apportionment of the profits in your 'final account' to the period from 01/01/2012 to 05/04/2012.

Either way, the profits for the period from 01/01 to 05/04/2012 have been used as the basis for tax twice, so you need to show on your 2012/13 tax return that you are carrying them forward as 'overlap profits' to be deducted from the profits that fall to be assessed in the tax year when you cease self-employment (or change your accounting date).

 

Thanks (1)
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By Martin B
04th Jan 2014 22:27

Alternatively you could choose 5th April as your accounting period end. For 2011/12 you have already declaired for the short period to 5/4/12. For 2012/13 produce a set of accounts for the year ended 5/4/2013 and annually thereafter. Obvioulsy the estimated 2011/12 figures would need to be corrected and could be incorporated into 2012/13.

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Replying to Jennifer Adams:
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By Amyjanep
10th Jan 2014 15:35

Hi Martin,

 

So just to confirm... When self employed and filling in your first self assessment you can have a first period of trading of less than one year, say 1 January 2013 to 5th April 2013 and then just do whole years thereafter which coincide with the tax year i.e. 6th April to 5th April? And by doing this you eliminate the need for overlap profits?  Thanks. 

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Euan's picture
By Euan MacLennan
10th Jan 2014 16:56

Yes - almost right

... but you have mixed up your dates.

You have already prepared "draft" accounts for the period from 01/01 to 05/04/2012 for your 2011/12 tax return.

If you now prepare accounts for the year from 06/04/2012 to 05/04/2103, they will form the basis of your 2012/13 tax return and you will have no overlap profits to worry about.  Your next accounts for the year to 05/04/2014 would be the basis for your 2013/14 tax return and so on.

BUT you cannot prepare accounts for the year to 31/12/2012, as you have already done, and for the period from 01/01 to 05/04/2013 and then, just include both of them on your 2012/13 tax return.  As you have changed your accounting date in the tax year, you would also have to deduct the overlap profit for the period from 01/01 to 05/04/2012, thus ending up with profits for the period from 06/04/2012 to 05/04/2013.  So, you might as well prepare accounts for that period in the first place.

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