Can I prepare an 18 month income statement for tax

Does HMRC allow 18 months income statement for Self Assessment?

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I started a small bitcoin mining and cryptocurrency trading ventures in December 2017 as a sole trader or self employed. I did not include this on my Self Assessment for tax year 2017/2018 (05 April 18). The mining is still in operation. 

Can I prepare an 18-month income statement for my Self Assessment tax year 2018/2019? And claim AIA?

Replies (47)

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By Matrix
22nd Oct 2019 07:04

No

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By Matrix
25th Oct 2019 06:49

Deleted

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By SteveHa
22nd Oct 2019 08:01

You can amend your 2018 Return, with due regard to the correct commencement provisions.

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Replying to SteveHa:
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By bounce100
23rd Oct 2019 19:55

Thanks very much. You are right

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By daniel_
22nd Oct 2019 10:14

No. The 2017/18 return should include trading from Dec 2017 until 05/04/2018.

2018/19 will depend on when you make your accounts up to. If it's an 18 month period then you won't have an accounting period ending the tax year so you would time apportion 12 out of 18 months of the accounts in 2018/19.

Probably better to prepare accounts to align with the tax year, especially if you have profits in either of these two periods as this way you can avoid overlap profits.

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Replying to daniel_:
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By Accountant A
22nd Oct 2019 11:30

daniel_ wrote:

make your accounts up

Good choice of words in the circumstances, I suspect!!

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Replying to daniel_:
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By bounce100
22nd Oct 2019 23:01

if i were to apportion the accounts as suggested which of the below will be correct:
(a) by preparing an income statement for the first 12 months i.e. from 1 December 2017 to 31 November 2018. Then prepare a second income statement from 1 December 2018 to 5 April 2019
(b) prepare an income statement from 1 December 2017 - 5 April 2018. And then prepare a second income statement for 6 April 2018 - 5 April 2019

And what will happen if I were to make a loss in both tax years?

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Replying to bounce100:
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By bounce100
23rd Oct 2019 19:57

plan (b) is the way. So I will amend tax return 2017/2018 for the burden. And the report 2018/2019 as usual.

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By Tax Dragon
22nd Oct 2019 10:23

On what basis have you concluded you are trading?

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Replying to Tax Dragon:
By ireallyshouldknowthisbut
22nd Oct 2019 12:24

The mining is probably trading. The 'trading' might or might not be, you would need to look at the whole activity.

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Replying to ireallyshouldknowthisbut:
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By Accountant A
22nd Oct 2019 12:35

ireallyshouldknowthisbut wrote:

The mining is probably trading. The 'trading' might or might not be, you would need to look at the whole activity.

Tax Dragon wrote:

On what basis have you concluded you are trading?

I think the OP is on top of all that detail. He's a clever Bitcoin trader making millions. We are boring accounting drones giving free advice.

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Replying to Accountant A:
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By Tax Dragon
22nd Oct 2019 12:46

Accountant A wrote:

We are boring accounting drones giving free advice.

Not me mate. I was just asking a question. (And the OP doesn't sound to me to be on top of anything.... ahh, you were being sarcastic.)

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Replying to ireallyshouldknowthisbut:
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By Tax Dragon
22nd Oct 2019 12:44

Mining can amount to trading, sure. Equally, it can not amount to trading, as I'm sure you know. Hence the question.

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Replying to Tax Dragon:
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By bounce100
22nd Oct 2019 23:02

HMRC deem mining an income.

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Replying to bounce100:
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By Tax Dragon
23rd Oct 2019 06:44

Indeed. But not necessarily trading income. On what basis have you concluded you are trading?

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Replying to Tax Dragon:
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By bounce100
23rd Oct 2019 20:19

Taking into account the degree of activity, organisation, risk and commerciality, it is certainly not a miscellaneous income but a trading activity.

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By The Dullard
22nd Oct 2019 11:42

Yes. You can do that, if you want. Hope you like getting your @r5e kicked.

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Replying to The Dullard:
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By bounce100
23rd Oct 2019 21:10

A typical "Dullard" @r5e response from The Dullard.

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By bernard michael
22nd Oct 2019 14:27

The problems come when he makes losses.

if he's trading then he may be able to use them. If not not

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Replying to bernard michael:
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By bounce100
22nd Oct 2019 23:05

If I make losses I am sure I should be allowed to adjust it my other sources of income.

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By Bob Loblaw
22nd Oct 2019 16:47

Just do whatever. HMRC won't check or query it. Sometimes I draw accounts up to 31 March, sometimes I draw them up to exactly 6:03pm on the third Friday of June. Sometimes I make them up for the last 16 months and included an arbitrary estimate for the next 3. Create some juicy overlap to baffle and confound me at a later date when the rum runs out and I pull my head out of whichever public toilet it landed in. It just depends on how frisky I'm feeling at any given moment.

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By Tax Dragon
23rd Oct 2019 06:50

I would politely suggest that, if you are doing this seriously and for profit, then you hire yourself an accountant.

For one thing, it's pretty obvious that you are mentally using the cash basis (without even being aware of such a thing). That might not be best. For another, there's no chance of you getting it right without help.

If you're not going it seriously and for profit, you can if you want forget the accountant - but you're not trading and won't get any relief for losses.

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Replying to Tax Dragon:
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By bounce100
23rd Oct 2019 08:03

I have prepared my profit and loss statement on an accrual basis. I can't afford an accountant at the moment as mining has been really unprofitable. I guess with an A-level education in financial accounting and costing I should do well in ascertaining the correct figures and applying the accounting concepts.
Is the legal framework or how HMRC wants things to be done, I am trying to understand.

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By daniel_
23rd Oct 2019 07:15

Would be awfully nice to treat it as a trade, claim AIA on all that expensive and unprofitable mining rig (read: gaming PC) and claim income tax relief on the lot.

May as well claim new trader relief to carry it back 3 tax years too.

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Replying to daniel_:
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By bounce100
23rd Oct 2019 09:50

That is right. That is what I am thinking. Entering the mining in December 2017 was a bad idea, as the market had peaked. And because of that, the rig (GPU) and ASICs prices were highly inflated.
My problem is how to go about it. As I didn't report the mining loss in 2017/2018 (5 Apr 18) on my self-assessment. Purely because I was not aware of whether HMRC will even deem it as a business.
Now I am preparing my self-assessment for 2018/2019. Should I just carry the loss forward from 05 Apr 18.

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By Tax Dragon
23rd Oct 2019 08:51

Wow. You spent a few hundred smackeroonies on a GPU.

You've convinced me you're self employed.

Not.

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Replying to Tax Dragon:
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By bounce100
23rd Oct 2019 09:07

I am.

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Replying to bounce100:
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By Tax Dragon
23rd Oct 2019 09:22

Then I suggest you find the funds to pay an accountant to help sort out the mess you are in the process of making.

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Replying to Tax Dragon:
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By bounce100
23rd Oct 2019 09:35

I guess I have to. Maybe some crypto specialist accountant. Geez, that is going to cost a lot of money!

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Replying to bounce100:
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By Tax Dragon
23rd Oct 2019 09:57

But save you a lot of penalties.

You've already (on your reckoning) submitted one incorrect tax return - and your proposed solution is to submit a second incorrect return.

Anyway, at least you have the sense to accept the advice.

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Replying to Tax Dragon:
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By bounce100
23rd Oct 2019 20:25

HMRC allows me till 31 January 2020 to make amendment on the 2017/2018 SA

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Replying to bounce100:
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By whitevanman
23rd Oct 2019 22:24

I suspect when you make your amended return, HMRC will open an enquiry (it seems from what you say that there will be a loss claim and that often attracts their attention). You will then discover that they do not readily accept that activities such as this amount to trading. It does depend on facts and the commentary they published in December last indicates the type of thing you would need to consider. Based on the little I know, few people in your position are likely to be trading, it simply isn't viable. Many estimate that the cost of electricity alone would exceed any income generated and you do have to compare your activity with, say, the warehouse type arrangement that real traders use.
In all this I think I can say I agree with others. Do nothing till you have consulted a knowledgeable, professional.

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Replying to whitevanman:
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By bounce100
23rd Oct 2019 22:55

It is definitely trading. I am honest. And I would welcome any scrutiny. It's not like I trying to hide. I have halted most mining activities now that crypto prices are low. But continue to use low electricity countries by shipping miners there

These costs have already happened, the evidence is available. I have done my double-entry accounts journals, ledgers, trial balance, profit and loss and in the process of balance sheet.

In the boom period, the cost of electricity was low. And I entered in the boom period. So the first 3 months was promising.

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Replying to bounce100:
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By bounce100
23rd Oct 2019 23:11

I surmise they don't allow depreciation on profit and loss account for tax purposes, owing to the capital allowance claim.

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Replying to bounce100:
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By whitevanman
23rd Oct 2019 23:13

No-one is suggesting you are dishonest, simply that you do not understand the legislation and (more importantly) case law on the subject, particularly about what is and is not trading. What you believe is hardly relevant.
Nor in fact can I or anyone else say categorically, that you are or are not trading. It depends on the facts and there will be very many such that have a bearing on the issue. So, I repeat what I and others have said, you really need to employ a competent, professional or suffer the consequences.

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Replying to whitevanman:
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By bounce100
23rd Oct 2019 23:43

I can't see any consequences here as far as I meet the 4 points. I don't know what I will say to myself if I pay an "expert" to tell me that the operation is trading. When I have already told myself that it is trading. And it is not like the expert is HMRC. HMRC may even differ on the "expert's" opinion.
There are a profit and commercial motive.
Part Financing a rig with other peoples money can't be miscellaneous income. This is not freelancing. Troubleshooting rigs, making miners efficient etc.. I am not talking about a laptop mining.

The legislation is plain simple.

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Replying to bounce100:
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By whitevanman
23rd Oct 2019 23:49

The fact that you say you meet the 4 points tells anyone who knows anything about the subject, that you are not one of their brethren. The stores (electronic and otherwise) of HMRC are filled with cases of people who knew as much as you and were equally wrong. But good luck (though clearly you will believe that luck will have nothing to do with it).

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Replying to whitevanman:
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By bounce100
24th Oct 2019 01:45

Not fair. If it booms and I make an extreme profit they want the tax. If it busts and I make a loss they don't want to know

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Replying to bounce100:
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By bounce100
24th Oct 2019 02:01

Maybe they should do what Portugal did: Bitcoin is not a taxable activity. If you make a profit, keep it. If make loss keep it.

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Replying to whitevanman:
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By bounce100
24th Oct 2019 13:51

Er .. just paid the next man from the other website to sort these things out. Guess he was wearing a suit, holding a laptop and telling me the same lines from HMRC so I consider him to be an expert.

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Replying to whitevanman:
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By bounce100
24th Oct 2019 11:29

The cost of electricity is relative. In March 2018, one ASIC miner of one crypto utility was generating £450 per day after deducting the cost of electricity (£5). Had about 2 of this in stock of other miners. By April 2018, this miner was making only £20 a day after electricity. Now it makes £2 a day.

The profitability starts diminishing so quickly as more miners join. So the tweaking for efficiency starts - in essence a miner now has to find way to compete so they can pay electricity and make a profit.

What do you call this? At one point it appears you can live off it. The industry is still a new kid in the block.

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By JCresswellTax
24th Oct 2019 09:34

Well this thread is extremely boring.

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Replying to JCresswellTax:
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By Tax Dragon
24th Oct 2019 09:40

Boom boom.

Took me a beat to get that one.

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Replying to JCresswellTax:
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By bounce100
24th Oct 2019 10:46

There are two kinds these days: the bored and the bores.

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Replying to bounce100:
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By Tax Dragon
24th Oct 2019 11:04

Bear that lesson in mind (mined?) for your cryptoassets. There are two types: those within the CGT regime (bought - or bored and retained) and those within the income tax one.

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Replying to Tax Dragon:
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By bounce100
24th Oct 2019 11:36

Both are not mutually exclusive. So most crypto enthusiasts will be liable in both regimes: CGT and IT.

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By bounce100
24th Oct 2019 21:47

Without a doubt, the tax guys are bored. Will all the accountants please stand up.

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