Question 2

Marie started trading as a hairdresseron 1 January 2016. He makes up accounts to 30 Julyeach year. The profits were calculated as:

Period to 31 July 2016 18,000

Year to 31 July 2017 40,000

Year to 31 July 2018 47,500

Year to 31 July 2019 48,000

1. In which tax year did she start trading?
2. Calculate her taxable profits in his first tax year of trading and state the basis period.
3. Calculate her taxable profits in his second tax year of trading and state the basis period.
4. Calculate her taxable profits in his third tax year of trading and state the basis period.
5. Calculate her overlap profits and explain what relief, if any, is available for them.
6. Describe threeof the badges of trade that HMRC will use to determine whether an activity should be classed as trading.