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1.1. Opening years rules (a)
There are special rules that apply for the opening tax years of a new trade until a CYB
assessment is available:
(b)
First tax year is always an
ACTUAL basis of assessment, i.e. the actual profit made from the
date the trade commenced through to the following 5th April.
(c)
It is the
second tax year where there are alternative bases of assessment that may apply
depending on the choice of accounting date and the detailed rules for this and the third tax
year of assessment are as follows:
(d)
Some profits may fall into more than one basis period in the opening years and are known as
overlap profits. Where there has been an overlap, overlap relief will be available on cessation
of trading allowing the overlap profit to be deducted in the final tax year of assessment - see
section 1.2.
Tax year Basis of assessment
Year 1 Actual profits from commencement
of trade to the following 5 April
Is there an accounting period
which ends in tax year 2?
How long is this
accounting period?
Assess the actual profits in tax
year 2 i.e 6 April to 5 April
Assess profits for the first
12 months of trading
Assess profits for the 12 months to
the accounting period end date
ending in year 2
Assess profits for the 12 months to
the accounting period end date
ending in year 3
Year 3 yes
< 12 months long
no
Year 2 ≥
12 months long
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