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HMRC internal manual

Business Income Manual

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Computation of liability: basis periods - change of accounting date

S214-S220 Income (Trading and Other Income) Act 2005 (ITTOIA 2005)

This page and the following pages up to BIM81060 explain how to determine the basis period when a trader decides to change from one accounting date to another accounting date. Note that these rules do not apply when accounts are made up to slightly varying dates each year (see BIM81030). In addition, accounts made up to 31 March, or 1, 2, 3, or 4 April may be treated as prepared to 5 April (S220 ITTOIA 2005).

The effect that a change of accounting date has on the basis periods depends on whether it occurs in:

  • tax years 1-3 from the date trading commenced, see BIM81040
  • tax year 4 and later years, see BIM81045.

Identifying the year in which the accounting date changes

The tax year in which a change of accounting date occurs is the earlier of:

  • the first tax year in which accounts are drawn up to the new date
  • the first tax year in which accounts are not drawn up to the old accounting date.

The accounting date

The general rule is that 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 a tax year the latest of those dates is the accounting date for that tax year.

Where there is a change of accounting date but no accounts are drawn up to a date in the tax year, the date in the tax year corresponding to the new date to which accounts will be drawn up is treated as the accounting date for that tax year.

Example 1

Christine makes up her accounts annually to 30 September up until 2010. She then prepares accounts for the 12 months to 30 September 2011 and for the 3 months to 31 December 2011.

A change of accounting date occurs in 2011-2012. This is the first tax year in which accounts are drawn up to the new accounting date (31 December 2011).

Example 2

Charles makes up his accounts annually to 31 March up until 2010. He then prepares accounts for the 13 months to 30 April 2011.

A change of accounting date occurs in 2010-2011. This is the first tax year in which accounts are not drawn up to the old accounting date of 31 March.

The accounting date for 2010-2011 is treated, for basis period purposes, as 30 April 2010.