Short Accounting Period

Short Accounting Period

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A sole trader started business in catering trade on 14 March 2001 having bought a lease for £9,000. He traded for a few months until 5 September 2001 and sold the lease for £30,000. In between the above period, he bought another lease for £16,000 in another part of the country running a similar business in MAy 2001 and commenced trading in his second shop.

What is the best period of account(s) in respect of the first and second business taking into account the acqusition and disposal of the leases.

What about the 2001 tax return. Surely, it is not practical to prepare half a month's account to 5 April 2001 just to avoid the overlap profit, if any.

Can someone advise please.

Simon

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By Accounting WEB
02nd Oct 2001 22:14

It simply doesn't matter for the business!
Simon,

As far the business is concerned it doesn't matter. Prepare your 1st set of accounts from 14/03/2001 to 30/04/2002 and treat both business as one for this purpose; I am assuming the business is unincorporate and it was trying to expand whilst running the 1st branch;

When you make your capital gains tax computation, make sure you roll over the gains against the second lease. This way the gains won't be taxed for the next 10 years! In the meantime, you can get 3rd propertyand so on. The gains are always rolled over thus avoiding an immediate CGT charge.

As to profits, for 2000/01 you calculate the profits as proportion of total profits to 30/04/02 and work in days; I have deliberately chosen the 30/04/02 date becasue one set of accounts can be used to assess profits for 3 years! i.e. 2000/01, 2001/02 and 2002/03. You will have overlap periods and consequently overlap profits which is carried forward and available to you as follows:

1) when you next change your accounting date;
2) when you cease trading;

Hope this helps.

Regards,

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By AnonymousUser
03rd Oct 2001 01:10

Revenue challenge
Simon
You can only roll over the full gain if all the £30,000 proceeds are re-invested in either permanent assets (ie freehold property) depreciating assets (ie another short - less than 60 year - lease). The time limit is 12 months before and 36 months after the original disposal. TCGA s152 to s156 apply.

You say that the businesses were similar not the same. You may be able to persuade the Inspector to treat both business as the same trade, but given that the two were in different locations you could encounter problems. Given the short period of the "first" business it is worth trying to pull the two together.
Without detailed knowledge of your clients two businesses it is difficult to give specific advice.
Good luck
Jacqui

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