BIM81280 - Transitional rules: no transition part of the basis period

If the basis period does not have a transition part, the profits for the 2023-24 basis period will be the profits of the standard part after any overlap profit has been deducted. In these circumstances the only overlap profits available for deduction would be where a deduction has not been claimed on a change of accounting date in an earlier tax year.

Example 10 – computation of profits – no transition part 

A trader makes accounts up to 5 April each year. The profit for the accounts ending 5 April 2024 is £20,000. 

The basis period for 2023-24 is only made up of the standard part which is the period from 6 April 2023 to 5 April 2024. The profits for the basis period are the profits of the standard part, £20,000.

Example 11 – computation of profits – no transition part with late accounting date

A trader makes accounts up to 31 March annually. The profit for the accounts ending 31 March 2024 is £35,000. The trader historically made accounts to 31 December, but in the year their accounting date changed they did not deduct £8,000 of overlap profit which was due.

The trader will be taxed on the profits of the standard part, the period from 1 April 2023 to 31 March 2024, as the late accounting date rules automatically apply.

The profits for the basis period will be computed by deducting the overlap profit from the profits of the standard part:
£35,000 - £8,000 = £27,000.

(If the trader elects to disapply the late accounting date rules, there will be a transition part from 1 April to 5 April 2024 and the rules in BIM81290 must be followed to calculate the taxable profits of the basis period.)