ExpertMedium2 marksMultiple Choice
ACCA · Question 16 · Income tax and national insurance contributions
Section B - Case 1: Quantum Aquatics
Zara and Felix run 'Quantum Aquatics', a partnership specializing in hydro-electric turbine maintenance. They share profits in the ratio 3:2. The partnership has always prepared accounts to 31 December. On 30 September 2023, Felix retired, and Zara continued as a sole trader. The partnership's tax adjusted trading profit for the 9-month period to 30 September 2023 was £90,000.
What is the basis period for Felix's final tax year (2023/24)?
Section B - Case 1: Quantum Aquatics
Zara and Felix run 'Quantum Aquatics', a partnership specializing in hydro-electric turbine maintenance. They share profits in the ratio 3:2. The partnership has always prepared accounts to 31 December. On 30 September 2023, Felix retired, and Zara continued as a sole trader. The partnership's tax adjusted trading profit for the 9-month period to 30 September 2023 was £90,000.
What is the basis period for Felix's final tax year (2023/24)?
Answer options:
A.
1 January 2023 to 31 December 2023
B.
6 April 2023 to 30 September 2023
C.
1 January 2023 to 30 September 2023
D.
1 October 2022 to 30 September 2023
How to approach this question
Apply the cessation rules for basis periods. The final basis period runs from the end of the basis period for the previous tax year to the date of cessation.
Full Answer
C.1 January 2023 to 30 September 2023✓ Correct
For Felix, his trade ceases on 30 September 2023. The basis period for the year of cessation (2023/24) begins immediately after the end of the basis period for the previous tax year (which ended 31 December 2022) and ends on the date of cessation. Therefore, it is 1 January 2023 to 30 September 2023.
Common mistakes
Assuming the basis period must always be 12 months, even in the year of cessation.
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