Accounting Period for Partnership

[Giedre]

Hello.
I would like to get some advice regarding my partnership tax return.
Can my account period be 1st October to 1st July?
I am a little confused about this term reading about it in different places of partnership notes, etc. I got the impression that the accounting period could be anything you like. It's more convenient to use the same date as the tax-year end, but it's not necessary. Am I right?
Also, would that mean I can put these dates into boxes 3.4 (1st October) and 3.5 (1st July) in form SA800?
Would appreciate your comments.

[jerome.lane]

The partnership accounting period can be whatever you choose it to be as long as it's not more than 18 months. It'll be practical to prepare accounts from the first day of a month to a last day of a month, rather than a 1st to 1st. For opening years, you will always pay tax on income arising in the tax year and then on a 12 month period of account thereafter, with overlap profit rules biting.

So, if you prepare accounts from 1 October 2019 to 30 June 2020 (a nine month period) and then prepare accounts to 30 June thereafter, your first basis period for tax purposes will be 1 October to 5 April 2020 and you will report and pay tax on 6/9 of the profits of the first accounts for the 2020 tax year (you can use 31 March instead of apportioning exactly to the day).

In the 2021 tax year, you will see that there is a set of accounts which is not 12 months, so you will need to report and pay tax on the 9 months accounts to 30 June 2020 and 3/12 of the accounts I assume you will be preparing to 30 June 2021.

This will create 6 months of overlap profits (1 October 2019 to 31 March 2020) which have been taxed twice.

In the 2022 tax year, you will pay report and pay tax on the 12 months of accounts prepared to 30 June 2021, adding a further 3 months of overlap profits since 1 April to 30 June 2021 will also now be taxed twice. There will be 9 months of overlap profits created, which will always be the case with a 30 June year end.

If the business is very profitable, this could be onerous and you might want to think carefully about your choice of accounting date. If you prepare 1 October 2019 to 30 September 2020, then you will only have 6 months of overlap created. Cash flow is often king so you should get full advice before deciding.