68 Short-lived businesses

Summary

This section alters the rules in section 66 relating to the basis of assessment in a commencement situation where a trade or profession is short-lived (that is, one which commences and ceases within a period of 3 years of assessment). In such cases, the assessment to tax is to be based on the actual profits earned in the period in which the trade or profession was in existence.

Details

Application

(1) The section applies to a trade or profession which commences and ceases within 3 years of assessment where the aggregate of the profits or gains of the trade or profession charged to tax exceed the actual aggregate of profits and gains of the trade or profession over its life.

Adjustments

(2) An adjustment is provided for in the form of a reduction in the amount of profits subject to tax in the year of assessment before that in which the business ceases. The adjustment ensures that tax is levied on actual profits only for that year. As a consequence, this ensures that tax is payable on actual profits over the life of the business since the profits of the first and final years of trading are already taxed on an actual basis. For the adjustment to apply, the taxpayer is required to notify the inspector in writing that his/her business is one to which this section applies. Such a notification must be made by the return filing date for the tax year in which the business ceases.

(3) A discontinued trade or profession includes one which ceases as a result of the death of the person carrying on the trade or profession.

Relevant Date: Finance Act 2021