Tx notes fa22 Final

Closing years rules 
The rules for dealing with the closing years of a taxpayer ceasing to trade are much more 
straightforward than opening years with CYB being used up to and including the penultimate tax 
year (one before last). The basis of assessment for the final tax year is then as follows:
(a)
The actual trading profits from the end of the basis period for the previous (penultimate) year of 
assessment until the date of cessation (all profits not yet taxed). 
(b)
Any overlap profit/relief from the opening years of the trade is then deducted in deriving the 
assessment for the final tax year.
 
Example 5 
Boris, who has been trading for many years making up his accounts to 31 January, ceases to trade 
on 31 May 2023 with trading profits as follows:
The overlap profits from the opening years of his trade were £6,000.
Compute the assessments for the final tax years of trading as far as the available information 
will allow. 
2. Basis periods for capital allowances 
Capital allowances are calculated for an accounting period. They are then treated as an expense, 
and deducted from the profits of that period. It is this tax adjusted trading profit figure that is used to 
determine the assessment for a relevant Tax Year.
2.1. Opening years 
Capital allowances are deducted from profits before the opening year rules are applied. For an 
accounting period longer or shorter than 12 months the AIA and WDAs are scaled up or down as 
appropriate. The FYA at 100% on cars with zero emissions is never time apportioned.
Trading 
Profit
£
Year to 31 January 2023
47,000
4 months to 31 May 2023
8,000

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