Self-Employed Income – Basis of Assessment Case I/II Basis of Assessment Year of Assessment Basis Period Actual Profits

Self-Employed Income – Basis of Assessment Continuing Business General Rule The basis period for the year of assessment is the accounting period of 12 months ending in the year of assessment.

Self-Employed Income – Basis of Assessment Commencement Year 1 Year 2 Year 3

Self-Employed Income – Basis of Assessment Commencement – Year 1 The assessable profits for the first year of commencement are the profits from the date of commencement to 31st December It may be necessary to apportion the profits accordingly

Self-Employed Income – Basis of Assessment Commencement – Year 2 Rule 1 – The profits from the 12 month accounting period ending in the second year of trading will be the assessable profits

Self-Employed Income – Basis of Assessment Commencement – Year 2 Rule 2 – Where more than one set of accounts end in the second year the assessable profits are the profits for the 12 months ending on the latest accounting end date in the second year

Self-Employed Income – Basis of Assessment Commencement – Year 2 Rule 3 – Where there is no accounting period ending in the second year of assessment the actual profits (1st January-31st December) for the second year are assessed to tax.

Self-Employed Income – Basis of Assessment Commencement – Year 3 The profits for 12 month accounting period ending in the third year are the assessable profits for the third year A revision of the profits of Year 2 is carried out in Year 3 and the Year 3 profits may be reduced in certain circumstances

Self-Employed Income – Basis of Assessment Commencement – Year 3 – Second Year Excess Calculate the Actual Profits for Year 2 Compare to the Assessed Profits of Year 2 Where the Actual Profits are less than the Assessed Profits the excess amount is deducted in Year 3 Where the Actual Profits are more than the Assessed Profits no adjustment is made

Self-Employed Income – Basis of Assessment Cessation – Final Year of Assessment The assessable profits are the profits from 1st January to the date of cessation

Self-Employed Income – Basis of Assessment Cessation – Penultimate Year When the business ceases a review of the second last year must be undertaken The actual profits for the penultimate year are calculated Where the actual profits are more than the assessed profits the assessment for the penultimate year is revised to the actual profits Where the actual profits are less than the assessed profits no revision occurs

Case I/II – Basis of Assessment Short lived business Assessment on actual profits, where a business commences and ceases within 3 years Applies where trade or profession: Commenced and is permanently discontinued within third year of assessment Total profits charged to income tax exceed aggregate profits form commencement to cessation