HMRC has opened a consultation on reforming Basis Periods for unincorporated businesses, such as sole traders and partnerships. The current rules are straightforward for those that draw up their annual accounts to 5 April, however complexities arise for those with alternative accounting periods, particularly in the first few years of trading.
Current Rules
Under the current rules, businesses are taxed on the Current Year Basis.
If a business draws it's accounts to 5 April, then the profits in that accounting period is allocated to the same tax year (i.e. 6 April - 5 April).
Where a business selects an accounting period end date other than 5 April the situation becomes more complex. The Basis Period for a tax year for the busin...
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