Income Tax (Trading and Other Income) Act 2005 section 216

Change of accounting date in later tax year

Section 216 deals with how the basis period is determined when a self-employed person changes their accounting date in a tax year after the third year of trading, provided they do not permanently cease trading in that year.

• A change of accounting date that meets the conditions in section 217 is effective for tax purposes, and the basis period simply aligns with the new accounting date in the year of change.
• If the new accounting date falls less than 12 months after the end of the previous year's basis period, the standard basis period rule in section 198 applies.
• If the new accounting date falls more than 12 months after the end of the previous year's basis period, the basis period runs from immediately after the previous basis period end to the new accounting date, resulting in a basis period longer than 12 months.
• If the conditions in section 217 are not met, the change is not effective for tax purposes and the basis period remains the 12 months ending with the old accounting date, requiring apportionment of profits.

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