I have a client who has been trading as a sole trader for many years, but this year she has started another business running alongside the old one.
The new business has the same accounting period and year end as the existing one, but in it's first year of trading should it's basis period be as for a new starting individual (Start date to 5th April), or do the rules surrounding basis periods apply just to the individual regardless of the number of businesses?
Cant seem to find any guidance on this subject where an individual has more than one trading business.
Not been asked this one before but I'll do my best.
Income tax is for individuals and so is the VAT threshold, but the commencement and cessation rules are for trades, professions and vocations.
The tax liability is derived from the accounts, then adjusted by the income taxes acts. These aim to tax the profit arising in any given year. Various sections of the act can be brought into play concerning losses, capital allowances, mergers, admission of partners but in particular, I'm thinking of overlap relief.
For instance, if one business was a courier business and the other was a car dealership, then in the first, a vehicle would be relieved under the capital allowances provisions and in the second a vehicle might be stock in the trading account. This could produce varying levels of profit, or loss.
Providing the new business warrants a separate set of accounts and there has, indeed, been a commencement of a distinct business, then you should apportion profits to the 5th April.
Annoying, when I think we have the longest tax legislation in the world, but I suspect there isn't any guidance on what you have searched for. The rules don't refer to a starting individual, only a new business.
I think i'm right in saying that you don't need to specifically inform HMRC of the new self employment other than on additional S/E pages. I'm sure someone could answer this in a nutshell, unfortunately, it's not me :o)
