BIM71015 - Computation of liability: basis periods - commencement years
The basis period for the first year in which a person starts to
carry on a trade, profession or vocation begins with the date of
commencement and ends with 5 April at the end of the tax year (or
any earlier date of cessation).
The basis year for the second year depends on whether
accounts are prepared to a date in the second year and the length
of the period for which such accounts are prepared.
This table summarises the normal basis period rules which
apply where accounts are regularly made up to the same date each
year.
| Year | Basis Period |
| Year 1 | Date 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 commencement | 12 months from date of commencement |
| - where accounting date in Year 2 is 12 months or more after commencement | 12 months to accounting date ending in Year 2 |
| - where no accounting date in Year 2 | 12 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) |
If the trade ceases in the second or third year the rules which
apply to the year of cessation are used, see
BIM71025.
Different rules apply where there is a change of accounting
date, see
BIM71035.
Example 1 – where accounting date in Year 2 is less than 12 months after commencement
A new trade commences on 6 January 2007. Accounts are prepared
for an 11 month period to 5 December 2007, and to 5 December in
each year after that.
The basis periods are:
| 2006-2007 | Year 1 | 6 January 2007 to 5 April 2007 |
| 2007-2008 | Year 2 | 6 January 2007 to 5 January 2008 |
| 2008-2009 | Year 3 | 6 December 2007 to 5 December 2008 |
Example 2 – where accounting date in Year 2 is 12 months or more after commencement
A new trade commences on 6 July 2007. Accounts are prepared for
a 15 month period to 5 September 2008, and to 5 September in each
year after that.
The basis periods are:
| 2007-2008 | Year 1 | 6 July 2007 to 5 April 2008 |
| 2008-2009 | Year 2 | 6 September 2007 to 5 September 2008 |
| 2009-2010 | Year 3 | 6 September 2008 to 5 September 2009 |
Example 3 – where no accounting date ends in Year 2
A new trade commences on 6 January 2007. Accounts are prepared
for an 18 month period to 5 July 2008, and to 5 July in each year
after that.
The basis periods are:
| 2006-2007 | Year 1 | 6 January 2007 to 5 April 2007 |
| 2007-2008 | Year 2 | 6 April 2007 to 5 April 2008 |
| 2008-2009 | Year 3 | 6 July 2007 to 5 July 2008 |
