Income Tax (Trading and Other Income) Act 2005

The normal rules

198 General rule

(1) The general rule is that the basis period for a tax year is the period of 12 months ending with the accounting date in that tax year.

(2) This applies unless a different basis period is given by one of the following sections—

• section 199 (first tax year),

• section 200 (second tax year),

• section 201 (tax year in which there is no accounting date),

• section 202 (final tax year),

• section 209 or 210 (first accounting date shortly before end of tax year),

• section 212 (tax year in which middle date treated as accounting date),

• section 215 (change of accounting date in third tax year), and

• section 216 (change of accounting date in later tax year).

199 First tax year

(1) The basis period for the tax year in which a person starts to carry on a trade—

(a) begins with the date on which the person starts to carry on the trade, and

(b) ends with 5th April in the tax year.

(2) But if a person starts and permanently ceases to carry on a trade in the same tax year, the basis period for the tax year is that given by section 202(2).

200 Second tax year

(1) The basis period for the second tax year in which a person carries on a trade is determined as follows.

(2) If in that tax year—

(a) the accounting date falls less than 12 months after the date on which the person starts to carry on the trade, and

(b) the person does not permanently cease to carry on the trade,

the basis period is the period of 12 months beginning with the date on which the person starts to carry on the trade.

(3) If in that tax year—

(a) the accounting date falls 12 months or more after the date on which the person starts to carry on the trade, and

(b) the person does not permanently cease to carry on the trade,

the basis period is that given by the general rule in section 198.

(4) If in that tax year—

(a) there is no accounting date, and

(b) the person does not permanently cease to carry on the trade,

the basis period is the same as the tax year.

(5) If in that tax year the person permanently ceases to carry on the trade, the basis period is that given by section 202(1).

201 Tax year in which there is no accounting date

(1) If a person carries on a trade in a tax year and—

(a) there is no accounting date in the tax year, and

(b) the person does not start or permanently cease to carry on the trade in the tax year,

the basis period for the tax year is the period of 12 months beginning immediately after the end of the basis period for the previous tax year.

(2) But this is subject to—

(a) section 200 (second tax year), and

(b) sections 215 and 216 (change of accounting date in third tax year or later tax year).

202 Final tax year

(1) The basis period for the tax year in which a person permanently ceases to carry on a trade—

(a) begins immediately after the end of the basis period for the previous tax year, and

(b) ends with the date on which the person permanently ceases to carry on the trade.

(2) But if a person starts and permanently ceases to carry on a trade in the same tax year, the basis period—

(a) begins with the date on which the person starts to carry on the trade, and

(b) ends with the date on which the person permanently ceases to carry on the trade.