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• # 79779
• Sun 19 Feb 2012 01:06 PM

Hi everyone

This may seam like an obvious question but your opinions will be much apreciated.

Someone is about to start trading  in the very near future (Looks like will be March)

My dilemer is dealing with their Accounting/Basis period.
The simplest thing in my opinion is to start the accounts on what ever date they start trading and close it off on 31/03/2012 (This will obviously result in an extramly short first accounting period)
I would then delare the profit and loss on their SA return for that period only.
THEN
Start their next accounting period 1st April 2012 - 31st Mar 2013 which will mean next years tax return will have the FULL 12 Month accounting period.

Doing it this way saves having to proportion the profits for teh accounting period on the tax return.

Am I correct in thinking this is the best way to deal with this busines?


Opinions are most welcome              

• Aaron Lilley
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• # 79797
• Mon 20 Feb 2012 09:45 AM

Hello Aaron,

I beleive the current advice on the HMRC concerning accounting dates for new sole traders is to take April 6th as the start date, and April 5th as the date the accounts are made up to.

For the newly self employed that I deal with I made the accounts up to the 5th April (For sole traders the start of the tax year is 6th April not the 1st, which I think is the standard date for limited companies). I have taken on the books of established sole traders, and they have various accounting dates, but for simplicity any start ups I deal with I use April 5th as the accounting date.

Hope that this helps 

Lucy 

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• # 79832
• Mon 20 Feb 2012 07:46 PM

Hi 

Just a view thoughts.  I totally agree that is is easier for us as bookkeepers  to have new start ups having the year end as the 5th April

There is a valid reason why accountants set up different years ends as it helps cashflow enormously , for clients who come under self assesment . For the purpose of the thread I not talking about Ltd companies.  

Banks do not lend money anymore and Customers are taking longer to pay other businesses which has a severe effect on cashflow .

Please see example Pretend Client Sole trader 

Client / Accountant picks the 30th April as their year end.  

This means that the profits for 30th April 2010 are not declared till  the Return for the 5th April 2011 , due online by 31st Jan 2012.   This gives the client much more scope for the cashflow .   

Whilst I agree not all clients deal with this well , and ending up spending their tax money when they should not have.

On the other hand you have clients who earn a decent amount on putting their money in ISA's or other saving and make a good bit of interest on it.  One of my clients made £2,500 on his tax money been saved.   

So as far as I am concerned it is better for sole traders to be earning interest on the money, than the HM Revenue .

 The HM Revenue gives  small business no breaks what so ever.  It is a personnal view the HM Revenue are quite happy to let big companies like Orange , Vodafone, Harods, Rangers away with not paying the tax immediately.    

It is not against Tax Law not to have your year end at the 5th Apr.

As a personnel opinion though , there are some clients that don,t control their finances, and this could land them with an unpaid tax bills because they have not been putting their tax away.   This is why the HM Revenue recommends this date.  

In relation to the 31st March HM or fine with this as most Accounts packages close end of months and not mid month, so therefore it is also can be easier to run it to the 31st March  as it avoids unnessary journal and mitakes been made, which I have seen been made by many a bookkeeper and accountant , whcih can end up with income been over or under declared. 

http://www.hmrc.gov.uk/helpsheets/hs222.pdf

The above Help sheet does advise you may find it easier, but is not Tax law your year end is the 5th April 




Edited at 20 Feb 2012 08:08 PM GMT

• Sarah Douglas C.FICB

  HouseTree Business Ltd 

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