Basis periods if accounting date is changed

The assessment of self-employed or partnerships profits is usually relatively straight-forward if the accounting date, to which annual accounts are prepared, falls between 31 March and 5 April. However, overlap profits can arise where a business year end date is not coterminous with the end of the tax year.

Overlap profits can happen in the first 3 years of the business or in any year in which there is a change of basis period (due to a change of accounting date).

HMRC’s guidance lists the following information about a change of accounting date:

If your accounting date in 2018 to 2019 is more than 12 months after the end of the basis period for 2017 to 2018, your basis period is the period between the end of the basis period for 2017 to 2018 and the new accounting date.

For example, your basis period for 2017 to 2018 ended on 31 May 2017 and the new accounting date is 31 August 2018 – your basis period is the 15-month period 1 June 2017 to 31 August 2018.

If your accounting date in 2018 to 2019 is less than 12 months after the end of the basis period for 2017 to 2018, your basis period is the 12 months ending on the new accounting date.

For example, your basis period for 2017 to 2018 ended on 31 December 2017 and the new accounting date is 31 July 2018 – your basis period is the 12-month period 1 August 2017 to 31 July 2018.