Income Tax (Trading and Other Income) Act 2005 section 48

Apportionment of profits or losses to tax years before tax year 2005-06

Section 48 deals with how profits or losses from a trade, profession or vocation are calculated and apportioned when an accounting period straddles the introduction date of the 2005 Act, falling partly before and partly on or after 6 April 2005.

• The rule applies where an accounting period begins before 6 April 2005 and ends on or after that date, and the period overlaps with basis periods for both 2005-06 and earlier tax years.
• Apportionment is needed when profits or losses of such a straddling accounting period must be allocated to the basis period for an earlier tax year (before 2005-06).
• Despite relating to earlier tax years, the profits or losses of the entire accounting period are calculated using the rules in Part 2 of the 2005 Act, effectively giving Part 2 retrospective application for this purpose.
• The apportionment of those profits or losses to any part of the accounting period falling within a pre-2005-06 basis period is carried out using the method set out in section 203 of the Act.