SolvedBIM81015 | Computation of liability: basis periods - commencement years
From HM Revenue & Customs · Business Income Manual
NOTE: The basis period rules are changing in 2023/24, which may mean that the guidance in these pages may not apply from the tax year 2023/24 (depending on your circumstances. Please see BIM81230 to BIM81360 for guidance on the transitional year in 2023/24 and BIM81201 for 2024/25 onward.
S199, S200, S201 Income (Trading and Other Income) Act 2005
Year 1
The basis period for the first tax year in which a person starts to carry on a trade:
begins with the date of commencement, and
ends with 5 April at the end of the tax year (or any earlier date of cessation).
Year 2
The basis period for the second tax year depends on:
whether or not there is an accounting date in the year, and
If there is an accounting date, whether this date is less than 12 months, or 12 months or more, since the date of commencement.
This table summarises the normal basis period rules which apply to the first three tax years of a new trade where accounts are regularly made up to the same date each year. The general rule will always apply to a continuing trade using the same accounting date each year from Year 3 onwards. See BIM81010.
| Year | Basis Period |
|---|---|
| Year 1 | Begins with date of commencement and ends with 5 April in Year 1 (or with 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 ending with the accounting date in Year 2 |
| - where no accounting date in Year 2 | Same as the tax year - 12 months beginning with 6 April in Year 2 |
| Year 3 onwards (in which there is no cessation) | 12 months ending with the accounting date in tax year |
If the trade ceases in Year 2 or a later year, see BIM81025.
Different rules apply where there is a change of accounting date, see BIM81035.
Example 1 - where accounting date in Year 2 is less than 12 months after commencement
A new trade commences on 6 January 2012. Accounts are prepared for the period from commencement to 31 December 2012, and to 31 December in each year after that.
The basis periods are:
| Year | - | - |
|---|---|---|
| 2011-2012 | Year 1 | 6 January 2012 to 5 April 2012 |
| 2012-2013 | Year 2 | 6 January 2012 to 5 January 2013 |
| 2013-2014 | Year 3 | 1 January 2013 to 31 December 2013 |
Example 2 - where accounting date in Year 2 is 12 months or more after commencement
A new trade commences on 6 July 2012. Accounts are prepared for the period from commencement to 30 September 2013, and to 30 September in each year after that.
The basis periods are:
| Year | - | - |
|---|---|---|
| 2012-2013 | Year 1 | 6 July 2012 to 5 April 2013 |
| 2013-2014 | Year 2 | 1 October 2012 to 30 September 2013 |
| 2014-2015 | Year 3 | 1 October 2013 to 30 September 2014 |
Example 3 - where no accounting date in Year 2
A new trade commences on 6 January 2012. Accounts are prepared for the period from commencement to 30 June 2013, and to 30 June in each year after that.
The basis periods are:
| Year | - | - |
|---|---|---|
| 2011-2012 | Year 1 | 6 January 2012 to 5 April 2012 |
| 2012-2013 | Year 2 | 6 April 2012 to 5 April 2013 |
| 2013-2014 | Year 3 | 1 July 2012 to 30 June 2013 |