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New Sole Trader - 19 month AP - tax basis periods?

What are the tax basis periods for a brand new sole trader with a 19 month accounting period?

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We have a brand new sole trader which has an accounting period 1/9/18 to 31/3/20 (19 months).

I believe it was established at the following link that it was ok to have a 19 month accounting period for a sole trader.

https://www.accountingweb.co.uk/any-answers/change-of-accounting-date-so...

If so, should the profits be apportioned to the following tax basis periods in the personal tax returns?

2018/19 - 1/9/18 to 5/4/19

2019/20 - 1/4/19 to 31/3/20

(5 days overlap profits)

Replies (26)

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By jonharris999
23rd Sep 2020 11:24

Why wouldn't you stop the first basis period at 31/3/19?

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By MC1
23rd Sep 2020 12:11

Do you mean accounting period or basis period?

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By jonharris999
23rd Sep 2020 15:08

The bp. Because don't HMRC treat all days between 31 March and 5 April as being the same (see lots of previous threads on this) ?

My understanding (!) has always been that there isn't an overlap arising between 1 and 5 April.

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By lionofludesch
23rd Sep 2020 23:18

jonharris999 wrote:

The bp. Because don't HMRC treat all days between 31 March and 5 April as being the same (see lots of previous threads on this) ?

My understanding (!) has always been that there isn't an overlap arising between 1 and 5 April.

The 31 March/5 April thing is actually enshrined in statute. It's not some HMRC concession.

I'm not convinced your 19 month accounts are valid as they're more than 18 months and don't end with a cessation. You might need to prepare accounts for two shorter periods - whether that be to March 2019
or some other date.

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Replying to lionofludesch:
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By MC1
24th Sep 2020 08:48

Thanks for responses.

Is the 31 March / 5 April thing a separate thing to the ability to prepare accounts up to a few days either side of the year end?

Why do you think 19 months have to end with a cessation?

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By lionofludesch
25th Sep 2020 17:43

MC1 wrote:

Thanks for responses.

Is the 31 March / 5 April thing a separate thing to the ability to prepare accounts up to a few days either side of the year end?

Yes - slight variations in accounting year s211 et seq ITTOIA

Accounts to a date between 31 March and 5 April counting as 5 April is a self employment thing. s208 ITTOIA refers.

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By MC1
25th Sep 2020 19:57

Thank you very much for the ongoing help and for the pointers which were exactly what I needed.
I think that s217 says that a basis period will not end on the new accounting date if the AP is >18 months. I think this means that the old accounting date will be used as the basis period end. I think this is the Harry Potter case.
But in my case I don't have an old accounting date so where do I go from there?

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By Paul Crowley
25th Sep 2020 20:03

Probably 2 accounting fees

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By lionofludesch
25th Sep 2020 20:19

MC1 wrote:

Thank you very much for the ongoing help and for the pointers which were exactly what I needed.
I think that s217 says that a basis period will not end on the new accounting date if the AP is >18 months. I think this means that the old accounting date will be used as the basis period end. I think this is the Harry Potter case.
But in my case I don't have an old accounting date so where do I go from there?

Ron Weasley, actually. Though, ultimately, a different point was at stake.

I agree. S217 is about changing accounting date, not a commencement.

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By Paul Crowley
25th Sep 2020 20:25

What happens on holiday stays on holiday
Do not expect to hear from you until back in the saddle

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By Paul Crowley
23rd Sep 2020 13:58

Why not prepare 6 months, then 12 months?
Was 2019 tax return submitted on an estimate?

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By lionofludesch
23rd Sep 2020 23:19

Paul Crowley wrote:

Why not prepare 6 months, then 12 months?
Was 2019 tax return submitted on an estimate?


It's a 19 month period.
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By MC1
24th Sep 2020 08:50

There are benefits in preparing one rather than 2 sets of accounts, one of which is an accountancy fee saving.

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By lionofludesch
24th Sep 2020 09:02

MC1 wrote:

There are benefits in preparing one rather than 2 sets of accounts, one of which is an accountancy fee saving.


There isn't if HMRC don't accept them and you have to go back and re-prepare.
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Replying to lionofludesch:
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By MC1
24th Sep 2020 10:31

Can't agree more so we wont prepare a 19 month period unless we are absolutely clear that we can.
As per my question above, why do you think a 19 month period would have to end with a cessation?

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By lionofludesch
24th Sep 2020 11:43

MC1 wrote:

Can't agree more so we wont prepare a 19 month period unless we are absolutely clear that we can.
As per my question above, why do you think a 19 month period would have to end with a cessation?


You can prepare accounts to cessation for more than 18 months provided you don't cross 5 April more than once.
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Replying to lionofludesch:
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By MC1
25th Sep 2020 12:47

Thanks for the help - I am struggling to find legislation / guidance on this, in particular as to why I cannot have an AP of more than 18 months for an ongoing business. I would be really grateful if you could signpost me in the right direction please.

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By lionofludesch
25th Sep 2020 13:53

MC1 wrote:

Thanks for the help - I am struggling to find legislation / guidance on this, in particular as to why I cannot have an AP of more than 18 months for an ongoing business. I would be really grateful if you could signpost me in the right direction please.

I'm not convinced you're wrong. Apart from the Capital Allowances, obviously. I'm merely suggesting you do your research.

I'm busy on holiday, being harangued by East Pembrokeshire harpies.

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Replying to lionofludesch:
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By MC1
25th Sep 2020 14:11

Ok, thanks
I will keep looking. Was hoping one of our learned people in here might be able point me in a direction as I am coming up blanks at the moment.

Enjoy the holiday! What better way to spend it than on AW.

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By Tax Dragon
26th Sep 2020 08:25

You've surely included Ss199 & 200 in your reading already, but they haven't been mentioned yet, so I've rectified that bemusing omission.

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By lionofludesch
26th Sep 2020 09:15

Nothing in there about 19 month accounting periods though, is there?

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By Tax Dragon
26th Sep 2020 09:56

Exactly. So what's the problem?

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By lionofludesch
26th Sep 2020 10:05

Dunno that there is one. I've said so.

Other than filing on time, obviously. And capital allowances.

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By Tax Dragon
26th Sep 2020 10:15

Agreed. And my mistake, I must've misunderstood your

lionofludesch wrote:

I'm not convinced your 19 month accounts are valid as they're more than 18 months and don't end with a cessation

and iterations thereof.

So forget I spoke. Except the OP seemed still to be looking for relevant statute, Ss199-200 seemed relevant, hadn't been mentioned, so I mentioned them. I'll leave it at that mention.

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By lionofludesch
26th Sep 2020 10:32

Tax Dragon wrote:

Agreed. And my mistake, I must've misunderstood your

lionofludesch wrote:

I'm not convinced your 19 month accounts are valid as they're more than 18 months and don't end with a cessation

and iterations thereof.

So forget I spoke. Except the OP seemed still to be looking for relevant statute, Ss199-200 seemed relevant, hadn't been mentioned, so I mentioned them. I'll leave it at that mention.

Sure. I did change my mind during the debate.

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By Paul Crowley
18th Oct 2020 18:28

How come your questions get prominence on the webcasts?
2 consecutively

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