I'm new on here so please bear with me, but I have a question that may seem simple to you all but I just can't get my head around, can anyone explain in plain English how I calculate profit when the accounts do not follow a tax year.
say business commenced Oct 11 but the profits are to Sept each year
would it be Year 1 Oct 10 - Mar 11 = 6 months
2 Apr 11 - Sept 11 = 6 months (thought I'd read that the second year had to be 12 months)
3 Oct 11 - Sept 12 = 12 months
4 Oct 12 - Sept 113 = 12 months
As I say, I know this might be simple to the experienced but I'm struggling with this concept. Any help would be appreciated
this relates to something called basis periods where the business year does not match to the tax year.
you don't state whether this is for an incorporated or unincorporated business? The answer would be different depending on which it is.
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
the basis periods for an unincorporated business that started on the 1st of October would be :
1 Oct 11 - 5 Apr 12 (initial period to tax year end)
1 Oct 11 - 30 Sept 12 (October to April profit taxed twice)
1 Oct 12 - 30 Sept 13 (normal annual cycle of accounts)
The initial double taxation is carried forwards until the end of business or change of accounting date.
Generally for the self employed a business start date of the 6th of April even if trading does not start until; later in the period is better.
HTH,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
sorry for the delayed reply, also doing other stuff.
you said in the first question that the business commenced in October 11.
Could you just confirm that date before I answer as I note that you state above that a profit of £30k was earned before the business started?
many thanks,
Shaun,.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
looking at your analysis of those tax years it all seems good to me.
Sometimes I feel it helps to visualise these things, I generally patch it into an Excel spreadsheet (or just scribble it out) which using your above figures would be :
not to scale of course otherwise it wouldn't fit on the page.
The above I feel more clearly highlights the overlap profits of £15k which will be taxed twice which wouldn't happen if a 6th of April start was used (regardless of when the business starts trading).
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
