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BIM71010 - Computation of liability: basis periods - general rules


The general rule is that the profits for a tax year are those arising in the period of 12 months ending with the accounting date in that year.

Different rules apply:


  • For the early years after trading commenced, see BIM71015;
  • For the year of cessation, see BIM71025;
  • Where there is a change of accounting date, see BIM71035.

Accounting date

The general rule is that the accounting date is the date in the tax year to which the trader’s accounts are drawn up.

Where accounts are drawn up to two or more dates in the same tax year, the accounting date is the latest of those dates.

Special rules apply where there are slight variations in accounting date each year, see BIM71030.


Summary of general basis period rules

This table summarises the normal basis period rules which apply where accounts are regularly made up to the same date each year. It shows that there are no gaps between basis periods for any tax years, but there may be overlaps.



YearBasis Period
Year 1Date of commencement to 5 April in Year 1 (or to earlier date of cessation)
Year 2 (in which there is no cessation)
- where accounting date in Year 2 is less than 12 months after commencement12 months from date of commencement
- where accounting date in Year 2 is 12 months or more after commencement12 months to accounting date ending in Year 2
- where no accounting date in Year 212 months ending on 5 April in Year 2
Year 3 onwards (in which there is no cessation)12 months to accounting date ending in tax year (or 12 months to 5 April if accounts not drawn up to a date in Year 3 and there has been no change of accounting date)
Year of cessation (in Year 2 onwards)From date immediately after end of basis period for previous year to date of cessation

Example

A trader starts trading on 1 October 2008, prepares their first accounts to 31 December 2009, and annually to 31 December until they cease trading on 30 April 2012. The trader’s basis periods are:



2008-2009Year 11 October 2008 to 5 April 2009
2009-2010Year 212 months to 31 December 2009
2010-2011Year 312 months to 31 December 2010
2011-2012Year 412 months to 31 December 2011
2012-2013Cessation1 January 2012 to 30 April 2012