BIM81260 - Transitional rules: basis period components for continuing trades
Standard part
The standard part is the first 12 months of the basis period. This is the 12-month period beginning immediately after the end of the basis period for 2022-23.
Standard part ends on or after 31 March 2024
Where the standard part ends on or after 31 March 2024 (but before 5 April 2024), in practice the trader will be taxed on the profits to the late accounting date (i.e., the profits of the standard part only), despite the basis period ending on 5 April 2024. This is because the late accounting date rules will, usually, automatically apply. These rules treat the profits from the day after the late accounting date to 5 April 2024 as nil in the 2023-24 tax year. Instead, the profits are treated as arising in the 2024-25 tax year.
The trader may choose to make an election to disapply the late accounting date rules (see BIM81210). This will mean that there will be a transition part which will start on the day following the late accounting date and end on 5 April 2024. See below for information on the transition part.
An election must be made on or before the first anniversary of the normal self assessment filing date for the 2023-2024 tax return.
Standard part ends before 31 March 2024
Where the standard part ends before 31 March 2024, there is a transition part that starts immediately after the end of the standard part and ends on 5 April 2024 or the late accounting date.
See below for information on the transition part.
Transition part
The transition part is the period that begins immediately after the standard part and ends on either:
- 5 April 2024 or
- The late accounting date if this falls on 31 March to 4 April inclusive (and there is no election to disapply the late accounting date rules).
If the accounts in the 2023-24 tax year are drawn up to an accounting date of 31 March to 4 April 2024 inclusive, the late accounting date rules (see BIM81210) will apply for the transition part. This means that the profits from the day after the late accounting date to 5 April 2024 will be treated as nil for the 2023-24 tax year and instead treated as arising in the 2024-25 tax year.
The trader may elect to disapply the late accounting date rules. This will mean the trader will need to apportion the profits from the date after the late accounting date to 5 April 2024. These profits will (subject to spreading) form part of the profits for 2023-24.
An election must be made on or before the first anniversary of the normal Self Assessment filing date for the 2023-2024 return.
Example 7 – basis period has standard part and transition part (no late accounting date)
A trader prepares accounts to 31 December each year.
The basis period for the 2023-24 tax year will be:
| Component | Period |
|---|---|
| Standard part | 1 January to 31 December 2023. |
| This is the first 12 months starting immediately after the end of the previous basis period. | |
| Transition part | 1 January to 5 April 2024. |
| This is the period starting immediately after the end of the standard part and ending on 5 April 2024. |
Example 8 – basis period has standard part (with late accounting date)
A trader prepares accounts to 31 March annually.
The basis period for 2023-24 will comprise:
| Component | Period |
|---|---|
| Standard part | 1 April 2023 to 31 March 2024. |
| This is the first 12 months starting immediately after the end of the previous basis period. | |
| Days following late accounting date | 1 April to 5 April 2024. |
| This is the period starting immediately after the late accounting date and ending on 5 April 2024. |
As the late accounting date rules apply, the profits for 1 April to 5 April 2024 are not treated as arising in 2023-24. They are treated as arising in 2024-25.
However, the trader may elect to disapply the late accounting date rules. If they make a valid election, there will be a transition part from 1 April to 5 April 2024 and these profits (subject to spreading) will be treated as profits of the 2023-24 tax year.
Example 9 – basis period has standard part and transition part (with late accounting date)
A trader prepares accounts to 30 April annually. However, their latest accounts are drawn up to 31 March 2024.
The basis period for the 2023-24 tax year will be:
| Component | Period |
|---|---|
| Standard part | 1 May 2022 to 30 April 2023. |
| This is the first 12 months starting immediately after the end of the previous basis period. | |
| Transition part | 1 May 2023 to 31 March 2024. |
| This is the period starting immediately after the end of the standard part and ending on the late accounting date. | |
| Days following late accounting date | 1 April to 5 April 2024. |
| This is the period starting immediately after the end of the late accounting date and ending on 5 April 2024. |
As the late accounting date rules apply, the profits for 1 April to 5 April 2024 are not treated as arising in 2023-24. They are treated as arising in 2024-25.
The trader may elect to disapply the late accounting date rules. If they make a valid election, the transition part will instead run from 1 May 2023 to 5 April 2024.