Income Tax (Trading and Other Income) Act 2005 section 213

Circumstances in which middle date not treated as accounting date

Section 213 ensures continuity between basis periods when the "middle date" treatment ceases to apply, so that no profits are taxed twice and no profits escape the tax charge.

• Where a middle date was treated as the accounting date for an earlier tax year, the basis period for the following year is calculated as though the earlier year's basis period ended on the date accounts were actually drawn up, not the middle date.
• This rule applies only where the following year's basis period is determined under one of four specific provisions: no accounting date in the tax year, the final tax year of a trade, a change of accounting date in the third tax year, or a change of accounting date in a later tax year.
• The purpose is to prevent gaps or overlaps arising between consecutive basis periods when the middle date differs from the actual date to which accounts were prepared.
• This is the third of three related sections designed to disapply the complex change of accounting date rules in particular circumstances, maintaining a seamless chain of taxed profits.