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HMRC internal manual

Business Income Manual

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HM Revenue & Customs
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Computation of liability: basis periods - change of accounting date in year 4 onwards

S216-S217 Income Tax (Trading and Other Income) Act 2005

Where a change of accounting date takes place in Year 4 or later years of trading three conditions must be met for the basis period for the year of change to end with the new accounting date.

The three conditions are:

  • the first accounts to the new date must not exceed 18 months
  • a notice of the change of accounting date must be given:

    • in a self assessment tax return for the year of change that applies to the person carrying on the trade, and
    • on or before the date that the return is required to be made
  • in cases where there has been an earlier change of accounting date (which resulted in a change of basis period) in the previous five years:

    • the latest change must be made for commercial reasons, and
    • those reasons must be set out in the SA return referred to above.

Guidance on commercial reasons for changing an accounting date is at BIM81050.

Where the conditions are met

Where the conditions are met, and the new accounting date is less than 12 months after the end of the basis period for the previous year, the basis period for the year of change is the 12 months ending with the new accounting date in that year.

Where the conditions are met, and the new accounting date is 12 months or more after the end of the basis period for the previous year, the basis period for the year of change:

  • begins immediately after the end of the basis period for the previous year, and
  • ends with the new accounting date.

Examples 1 to 4 at BIM81060 illustrate this.

Where the conditions are not met

Where the conditions are not met, the basis period for the year in which the change of accounting date takes place remains as the period of 12 months ending with the old accounting date in that tax year.

Examples 5 and 6 at BIM81060 illustrate this.