Allocating amounts to basis periods (2022-23 and earlier)

1. Key points

1.1. Rules only apply for 2022-23 and earlier

1.2. Requirement to allocate profits or losses once basis period identified

1.3. Profits may be included in more than one basis period

1.3.1. Overlap profits

1.4. Relief for overlap profits

1.4.1. On cessation

1.4.2. Sometimes on change of accounting date

1.5. Loss can only be included in one basis period

2. Losses

2.1. Losses only included in one basis period

2.2. Loss allocated to two basis periods

2.2.1. Only included in the first

3. Overlap - change of accounting date

3.1. Deduction of overlap profits where a change of accounting date occurs in the tax year

3.1.1. If basis period for that tax year > 12m

3.2. Deduction is mandatory

3.3. To ensure taxed on 12m worth of profits

4. Profits and overlap profits

4.1. Profits apportioned when accounting period does not coincide with basis period

4.2. Accounting profits may be apportioned to more than one basis period

4.2.1. Overlap period

4.3. Apportioned on a time basis

4.3.1. May use another reasonable basis if applied consistently

4.4. Relief for overlap profits on cessation and change of accounting date

5. Overlap - cessation

5.1. Relief for overlap profits when trade ceases

5.2. Deducted in calculating trade profit / loss in the final tax year of trade

5.3. Deduction is mandatory

5.3.1. No claim required

5.4. Overlap profits = overlap profits arising in earlier periods - any relief given on a change of accounting date