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Sole Trader change of accounting date

Sole Trader change of accounting date

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A Client of mine wants to change the accounting date to 5th April from 30th September in his second year of trading as he may take up employment as well as being a self employed hairdresser.  Not complicated but wondered what the implications would be as I have not come across this before or been asked the question.

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The triggle is a distant cousin of the squonk (pictured)
By Triggle
22nd Dec 2014 21:01

The only way to find out what the implications of changing the period of account are is to work out the new basis periods and how this would affect the amount of profit subject to tax.

On what date did the client begin to trade as a sole-trader?

Are you shortening the second year to end on the 5 April or extending it to end on the 5 April?

What are the assessable trading profit/losses for the periods of account?

Basically, it's a number crunch exercise.

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RLI
By lionofludesch
23rd Dec 2014 14:15

Doesn't matter

Actually, it doesn't matter whether you shorten or extend.  The profits in the year of change will be the eighteen months 1st October 20x1 to 5th April 20x3 less the overlap relief established when the business was set up with a September year end.

Strictly, you should split the Capital Allowances period to the first twelve months and the next six months and five days

 

Edit 

Sorry - I should, of course, say that if you shorten, the year of change will be the year before the one it would have been if you extend. So, if, for example, preserving personal allowances is an issue, the decision may well matter.

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