Hello Everybody.... Does any one know how Basis period or overlap profits occur..........
Imagine we ve got exams in 2 weeks time and i dont know how to calculate a basis period and overlap profits
Anybody pleaseeeeeeeeee helppppppp meeeeeeeeeeeeeeeeee.........
Any help will be appreciated faithfully.......
Thank you :lol:
:shock: :D :) :( :o :arrow: :idea: :?: :!:

Dear Nishant,

Basis Period and Overlapping profits is a huge topic and i can't explain it to you using this forum, an alternative you can do is find some one near to you who could give you 3 to 4 hours and learn these topics from that person.

Do not waste your important time in posting irrelevant smileys.

Regards,

Muhammad Amir

there is a diagram in the textbook for working out basis periods, there is no shortcut, you just have to learn it. However once you know it you will always be able to apply it and get it right

Dear

Just do last 5 years papirs and u ll pass. Short cut. If u have working experience in Accounts/Tax.

I will try to explain you, as it took me several days to crack this shit (i still do not understand the logic behind this complex rulez devised by HMRC). It will also help me to revise this topic before the exam. I might be wrong so correct me if find me so (as I am still learning)
NORMAL RULE: for any year which is not the first 3 years or the last year of business (till cessasion date) the basis period for the tax year is the actual accounting year ending in that tax year, i.e. if accounting period ends say on 30th of April then basis period for tax year 2007/2008 is 1 May 2006 - 30 April 2007 <---- (because Y/E 30/04/07 is in THAT tax year).
Now the hard stuff:
1. For the first 3 years of business there are special rulez, each depending how long is the accounting period in each year:
- FIRST YEAR OF BUSINESS: this is simple, the basis period is always from the commencement date till the first end of tax year (i.e. first forthcoming 5th of April). If the commencement date doesn't start in April, then you need to prorate accordingly, rounding down to the nearest whole month. E.g. The first period of business started 01/05/07 and ran till 31/06/08 (i.e. 14 months) and adjusted trade profits totalled £28,000. The basis period for tax year 2007/2008 is the 01/05/07-05/04/08 = 11 months ==> (11/14)*28,000 = £22,000.
TO BE CONTINUED.

SECOND YEAR OF BUSINESS: In order to crack it, you need to answer the question: "Is there an accounting period ending in TAX YEAR 2?"

IF NO ==> then basis period is from 6 april [07] - 5 april [08] - i.e. you need to prorate accordingly. Say for example the first year of business started on 01/12/06 and ended 30/04/08 (17 months) and adjusted profits were £34,000, the first tax year is 06/07 (01/12/06-05/04/07) = 4months ==> 4/17*34,000 = £8,000. The second tax year 07/08 (06/04/07-05/04/07) = 12 months ==> 12/17*34,000 = £24,000. In this case there are not overlap profits, but will be in year 3 WHY?:lol:

IF YES ==> ask another question "Is THAT accounting period is less than 12 month?"
IF NO, 12 MONTHS AND MORE ==> then take 12 months till the end of tax year (i.e till 05th of April)
IF YES, LESS THAN 12 MONTHS ==> take the first 12 moths of business

TO BE CONTINUED