Hi, just a quick question (hopefully)
Client wiill be registered as self-employed from 1 Feb 2011. I want him to have a year end of 31/3 to coincide with tax year so will he have to fill out a tax return for the 2 months to 31/3/11 or 14 months to 31/3/12 or is there a choice.
I appreciate I may be missing something fundamental about basis periods and would appreciate your opinions.
Many thanks
Replies (4)
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Strictly it would be 01/02/11 - 05/04/11 for the first year, but 01/02/11 - 31/03/11 would be acceptable too.
You have zero choice from a tax point of view. You could make your accounts any length and you would still have to pay tax based on the period to 05/04/11.
SLight variation on above
You can prepare the first accounts to 31 March 2011 or 2012.
If you accounts to 2012 you would time apportion the profits for the period to March 2011 (2/14).
This may have advantages depending on your clients prior income in the current tax year and next years profits.
The only problem you will have is the timing as the 2012 accounts will be prepared after the filing deadline so you would have to estimate the 2/14 figure anyway although you can then adjust if the final figure is vcastly different.
If you do accounts to 2012 the Revenue guidance is that you can apportion an alternative method if justifiable ie actual profits anyway.
So in summary my suggestion would be to do accounts to 31 MArch 2012 and the depending on the tax consequences calc the profit taxable to 31 March 2012 on actual or time apportioned.
The second year profits are calculated for the 12 months from the accounting date ie y'e 31 MArch 2012 so you wont create any overlap profits.