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The current year basis (CYB) taxes the income of a sole trade or partner based on the 12 months accounting period ending in the fiscal year. It replaced the prior year basis (PYB) for all trades that commenced trading on or after 6/4/94. Older businesses switched to the CYB in y/e 5/4/97 (the transitional year) and the CYB applied formerly from 6/4/97 onwards. (If a business that started trading before 6/4/94 ceases to trade on or before 5/4/97 it remains under the old PYB rules. If it ceases trading between 6/4/97 and 5/4/99 the Revenue may apply the s63 election which will affect the basis of taxation).
The current year basis is a twelve month period ending in the fiscal year. There are special rules for the first, second, penultimate and final years of trading. There are also rules to cover a change of accounting date.
IRIS will apply the opening year rules where the date trading started has been entered for a sole trade or the involvement start date has been entered for a partner.
s.61(1) actual basis. That is the period from the trading start date to 5th April in the fiscal year.
In most cases, overlap profits will accrue in the second year. If the account period end date is 31/3 or 5/4 there will not be any overlap.
If there is a twelve month period ending in the year: s.60(3)(a) current year basis; otherwise
If the first period is shorter than 12 months: s.61(2) first twelve months; otherwise
If the first period is longer than 12 months and ends in the second fiscal year: s.60(3)(a) twelve months to period end date; otherwise
If the first period is longer than 12 months and ends in the third fiscal year: s.60(1)actual basis
Current year basis s.60(3)(a). If the period is longer than 12 months then twelve months to period end date but see the change of accounting date rules.
IRIS will use the closing year rules where the date trading ceased has been entered for a sole trade or where the involvement end date has been entered for a partner. Closing year rules take precedence over opening year rules and the rules governing a change in accounting date.
If there is an account period ending in the year: s.60(3)(a) current year basis; otherwise
Where the final period of accounts spans the penultimate year: s.60(3)(b) twelve month period starting the day after the previous year's period end date.
s.63 Period from the day after the penultimate year's basis period to the close of trading.
Overlap relief is deducted from the closing year's profits.