BIM81240 | Transitional rules: trades commencing in 2023-24

This guidance applies to trades commencing (and not ceasing) in 2023-24.

The basis period for the trade will start on the day the trade commences and will end on 5 April 2024.

In practice, a new trade accounting to 31 March 2024 will be taxed on its profits to the late accounting date (despite the basis period ending on 5 April 2024) unless an election is made to disapply the rules.

A late accounting date is an accounting date that falls on a date between 31 March to 4 April inclusive. See BIM81210 for the late accounting date rules.

Example 5 – section 7B applies (rules if trader starts to carry on trade after 31 March)

A trade commences on 1 July 2023 and the first accounts are prepared to 31 March 2024. The basis period for 2023-24 is 1 July 2023 to 5 April 2024. The profits for 2023-24 are those of the 9 months to 31 March 2024. The 5 days’ profits from 1 to 5 April 2024, which would count as profits for 2023-24 if there were no special rules, are treated as nil in 2023-24. Instead, these profits are treated as arising in 2024-25.

If the trader makes an election to disapply the late accounting date rules in section 7B, the profits for 2023-2024 would include the profits from 1 April to 5 April 2024.

Example 6 – section 7B applies (rules if trader starts to carry on trade after 31 March)

A trade commences on 1 April 2024 and the first accounts are prepared to 31 March 2025. The basis period for 2023-24 is 1 April to 5 April 2024. The profits and losses for 2023-24 are treated as nil. The 5 days’ profits from 1 to 5 April 2024, which would count as profits for 2023-24 if there were no special rules, are instead treated as arising in 2024-25.

If the trader makes an election to disapply the late accounting date rules in section 7B, the profits for 2023-24 would include the profits from 1 April to 5 April 2024.