Income Tax (Trading and Other Income) Act 2005 section 203

Apportionment etc. of profits to basis periods

Section 203 sets out the rules for apportioning trading profits or losses when a business's accounting period does not align with the basis period used for a tax year.

• Where the basis period for a tax year does not match the period of account, profits or losses must be apportioned between the relevant periods
• Apportionment is carried out by splitting profits or losses of an accounting period across different basis periods and, where necessary, combining parts of different accounting periods together
• The default method of apportionment is on a time basis, calculated by reference to the number of days in each period
• The trader (but not HMRC) may use an alternative method of measuring the periods, provided it is reasonable and applied consistently for the trade