Change of accounting date

When there is a change of accounting date, the basis period for the tax year may differ from the accounting period, although this will depend on whether the accounting period has been shortened or lengthened. A shorter accounting period may mean that overlap profits will arise as the basis period will be the twelve months to the new accounting date. A longer accounting period will not affect the basis period but may mean that any available overlap profits can be utilised.

Shortening of an accounting period

The following example shows a business that has been trading for many years with an accounting period end date of 31 October. During the tax year 2017/18, it has been decided to change the accounting period from 31 October to 31 July.

Using SimpleStep

1. Browse to Your work > Self Employment

Enter the whole period of account (not the basis period) and the turnover. This will start from the day after the last accounts were made up to and will finish on the new accounting date.

2. If the annual turnover is below the relevant threshold for the year (£85,000 for 2019/20), then TaxCalc will automatically default to the ‘Short Form – Details’ completion. However, TaxCalc will also recognise that your account period is not for a full year and will, therefore, prompt you to go to the Annualised turnover page by marking the page with a red cross. If this is the case, you will need to tick the box to confirm that you wish to complete the Full form.

If your profits exceed the threshold, the Full Form – Details will automatically be selected and no further action will need to be taken.

3. Go to Full Form – Details

Enter all relevant details. Please note that the commencement date cannot be entered as this falls outside of the 2018/19 tax year.​

4. Click on Next Step and complete all applicable boxes on the following pages. This will result in the Net business profit for tax purposes, found on the Adjustments page.
5. TaxCalc should have already prompted you that the Basis Period section needs completing by showing a red cross next to the page. Click on Next Step (if on the Adjustments page) or Go to Basis Period to enter the Basis period adjustment required to work out the assessable profits for the tax year.
6. Basis Period – The basis period start and end dates and basis period adjustment can be entered manually if you know what these are, along with any overlap profits arising. Alternatively, tick the box and you can use the basis period/overlap calculator to work out the adjustment for you, as shown at point 7 below.
7. The basis period calculator will use the accounting period information already entered but it also requires the previous period’s accounting information to work out the basis period, profits and overlap relief arising.
8. Click on the ‘Add accounting periods’ button and you will be given the option to either Import the previous year’s accounting period information from a previous Tax Return or, if this is not available, you can enter the information manually by selecting ‘Add account period’.

2. Once this information has been entered, the basis period calculator will then work out the basis period, profits and overlap relief arising in the period.

8. Close the basis period calculator and all the calculations will be shown for inclusion on the Tax Return.
9. Any Other adjustments, losses and other further information can then be entered in the normal way.

Lengthening an accounting period

The following example shows a business that has been trading for many years with an account period end date of 31 October. During the tax year 2018/19, it has been decided to change the account period from 31 October to 31 January.

Using SimpleStep

1. Browse to Your work > Self Employment

Enter the whole period of account (not the basis period) and the turnover. This will start from the day after the last accounts were made up to and will finish on the new accounting date.

2. If the annual turnover is below the relevant threshold for the year (£85,000 for 2018/19), then TaxCalc will automatically default to the ‘Short Form – Details’ completion. However, TaxCalc will also recognise that your account period is more than a full year and will, therefore, prompt you to go to the Annualised turnover page by marking the page with a red cross. If this is the case, you will need to tick the box to confirm that you wish to complete the Full form.

If your profits exceed the threshold, the Full Form – Details will automatically be selected and no further action will need to be taken.

3. Go to Full Form – Details

Enter all relevant details. Please note that the commencement date cannot be entered as this falls outside of the 2018/19 tax year.

4. Click on Next Step and complete all applicable boxes on the following pages. This will result in the Net business profit for tax purposes, found on the Adjustments page.

5. Basis Period – A long period of account will not require any basis period adjustment but if overlap profits have been brought forward from earlier years, some or all of these may be utilised against the taxable profits for the period. If you know what this value should be, you can manually enter the number of days and overlap relief that can be utilised.

Alternatively, tick the box and you can use the basis period/overlap calculator to work out the overlap profits utilisation for you, as shown at point 6 below.

6. The amount of overlap profits utilised will depend on the length of the accounting period and number of days of overlap profits available. The utilisation of overlap profits will reduce the length of the basis period to a minimum of 365 days. 

7. Close the basic period calculator and the utilisation of overlap profits will be shown for inclusion on the Tax Return.

 8. Any Other adjustments, losses and other further information can then be entered in the normal way.

For First Years Rules please see knowledge base article on: Worked example of a business that started trading in 2017/18 - Basis Periods (First year rules)

For Second Year Rules please see knowledge base article: Worked example of a business that started trading in 2016/17 - Basis Periods (Second year rules)