BIM71005 - Computation of liability: introduction to 'current year' basis

The ‘current year’ basis period rules apply:

• For 1997-1998 and later years if the trade, profession or vocation commenced before 6 April 1994.
• For 1994-1995 and later years if the trade, profession or vocation commenced on or after 6 April 1994.

General rule

The general rule is that the profits for a tax year are those arising in the period of 12 months ending with the trader’s accounting date in that year (ITTOIA05/S198).

The accounting date is the date in the tax year to which 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 (ITTOIA05/S197).

Different rules apply in the early years after the trade commenced, to the year of cessation, and for tax years in which there has been a change of accounting date.

Where no accounts are drawn up to a date in the tax year, the general rule is that the basis period for the tax year is the period of 12 months beginning immediately after the basis period for the previous tax year (ITTOIA05/S201)

Structure of this guidance

This guidance is divided into four main parts:

• The normal rules for determining basis periods (ITTOIA05/S198 to S202), see BIM71010;
• Special rules where there is a change of accounting date (ITTOIA05/S214 to S219), see BIM71035;
• Apportioning profits and losses to basis periods (ITTOIA05/S203 and S206), see BIM71065;
• Giving ‘overlap relief’ for overlap profits (ITTOIA05/S205 and S220), see BIM71075.