» Accounting periods, basis periods and overlap profits or loss
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I am a little confused about accounting periods and basis periods after reading guidance HS222 for the tax year 6 Apr 2016 to 5 Apr 2017.
I run a business from my home offering professional consultancy service (similar to lawyers, architects, etc.). I do not have any physical items (that is, no goods or stocks) to sell. Assets and expenses comprise computers, office equipment and stationery. I registered as a sole-trader and my business began on 1 July 2016. I am not VAT-registered. I am using the accruals basis of accounting.
Can I set my accounting period to align with the tax years and to avoid overlap profits or loss? This means:
Year 1: 1 Jul 2016 to 5 Apr 2017 (9 months)
Year 2: 6 Apr 2017 to 5 Apr 2018 (12 months)
Year 3: 6 Apr 2018 to 5 Apr 2019 (12 months)
and so forth.