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Calculating overlap profits

Which period can you use for the basis?

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A partnership prepares accounts to 30/9 each year.

A new partner joins on 01/05/18.

When preparing their individual tax return for 2018/19, their basis period will be 1/5/18 to 5/4/19.  The period 1/5/18 to 30/9/18 can be taken from the actual partnership accounts for that accounting period.

To calculate the profits for the overlap period (1/10/18 to 5/4/19), are they pro rata from the accounting period ended 30/9/19 or 30/9/18?  30/9/19 would be more accurate, but what if those accounts had not been prepared yet?

Confirmation of if there is a specific method that must be used to calculate that overlap period would be appreciated.

Thanks for your help!

 

 

Replies (5)

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RLI
By lionofludesch
23rd Oct 2019 16:05

They ?

It's just the new partner affected. Everyone else carries on as usual.

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By daniel_
23rd Oct 2019 16:08

First tax year, 2018-19, tax the period 01/05/2018 to 05/04/2019
= [5/12 of the YE 30/09/2018 accounts] +[6/12 of the YE 30/09/2019 accounts]

Second year 2019-20, tax the 12 month accounting period ending in the tax year, YE 30/09/2019.

The overlap profits come from the period taxed twice, which will be 6/12 of the YE 30/09/2019 accounts

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Replying to daniel_:
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By Susiepie
23rd Oct 2019 16:12

Thank you Daniel.
That all makes sense, but what if the 30/9/19 had not been calculated yet? Technically they would not need to be done until March 2020 (LLP), which is after the deadline for filing the 2018/19 tax returns.
Could it then be based on the 30/9/18 accounts?

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Replying to Susiepie:
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By Susiepie
23rd Oct 2019 16:14

Ignore this - it has been answered below! Thank you.

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By The Dullard
23rd Oct 2019 16:08

There is a specific method. Estimate in the first instance, and then go back and revise once you have the figures to 30/9/19.

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