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Taxation (UK) · The comprehensive computation of corporation tax liability

Accounting Periods and Long Periods of Account

Updated 11 October 2026 · Fact-checked

A company pays corporation tax on profits of a chargeable accounting period, which can never exceed 12 months. If a period of account is longer than 12 months, split it into a first 12-month period and a second period for the balance. Time-apportion trading profit and property income by months; put gains in the period of disposal.

Understand Accounting Periods and Long Periods of Account

Companies pay corporation tax by chargeable accounting period (CAP), not by tax year. A CAP is the period for which a corporation tax computation is made and for which a return is due. It is never longer than 12 months.

A CAP usually matches the company's period of account, which is the period for which it prepares its financial statements. If the accounts run for 12 months or less, the period of account is normally one CAP.

A CAP starts when the company becomes within the charge to corporation tax, for example when it starts trading, or immediately after the previous CAP ends. A CAP ends on the earliest of: 12 months after it started, the end of the period of account, the company starting or ceasing to trade, or the company ceasing to be within the charge to corporation tax. The start of a winding up also ends a CAP, and a new one begins.

When the period of account is longer than 12 months, it is split into a CAP of the first 12 months and a CAP for the balance. For example, 18 months from 1 January to 30 June of the following year gives a CAP of 12 months and a CAP of 6 months. In exam questions the period of account is typically no more than 18 months, so the second CAP is short.

Each CAP is then taxed separately, with its own computation, rates and limits. Adjusted trading profit and property income are time-apportioned over the period of account by months, as the supplementary instructions say apportionments are to the nearest month. The apportionment is made before capital allowances, which are computed separately for each CAP. Interest (loan relationship) income is allocated on an accruals basis, and chargeable gains fall in the CAP in which the disposal occurred.

Key rules to remember

Maximum length of a CAP
CAP ≤ 12 months
A period of account over 12 months is split into a 12-month CAP followed by a CAP for the balance.
Time apportionment of trading profit
Profit for CAP = Total adjusted trading profit × (months in CAP ÷ months in period of account)
Apportion to the nearest month. Apply this to the adjusted trading profit before capital allowances; then deduct each CAP's own capital allowances.
Capital allowances in a long period
Compute capital allowances separately for each CAP
The annual investment allowance limit and the writing down allowance are for each CAP, and both are time-apportioned for a CAP shorter than 12 months.
Non-trading income and gains
Allocate to the CAP in which they arise
Property income is time-apportioned, like trading profit. Interest (loan relationship) income is allocated on an accruals basis, and chargeable gains fall in the CAP of disposal.
Corporation tax limits for a short CAP
Lower limit £50,000 and upper limit £250,000, each × (months in CAP ÷ 12)
Reduce the limits for a short CAP. For example, a 3-month CAP has an upper limit of £250,000 × 3/12 = £62,500. Marginal relief: (Upper limit – augmented profits) × 3/200 × taxable total profits ÷ augmented profits.

How to solve Accounting Periods and Long Periods of Account questions

Use this method for any question that gives a period of account and asks for the CAPs or the profit in each.

  1. 1Write down the start and end dates of the period of account and count the months.
  2. 2If it is 12 months or less, it is one CAP. If it is over 12 months, split it: CAP 1 is the first 12 months and CAP 2 is the remaining months.
  3. 3Write each CAP's start and end dates clearly, for example 1 January 2025 to 31 December 2025.
  4. 4Compute the adjusted trading profit for the whole period of account before capital allowances.
  5. 5Time-apportion the trading profit before capital allowances by months, to the nearest month.
  6. 6Compute capital allowances separately for each CAP, then deduct each CAP's allowances from that CAP's apportioned profit.
  7. 7Time-apportion property income by months. Allocate interest income on an accruals basis and gains by the date of disposal, and then prepare a separate computation for each CAP.
  8. 8Check that the CAP amounts add up to the total, and that each period is no longer than 12 months.

Quickest way: Split, apportion, then adjust

When to use it: Use this in Section C when time is short and a period of account is longer than 12 months.

  1. Write the two CAPs as months, such as 12 and 6.
  2. Write the fractions 12/18 and 6/18 beside them.
  3. Multiply the pre-capital-allowance trading profit by each fraction.
  4. Deduct each CAP's own capital allowances.
  5. Put other income and gains in the CAP in which they arose.
  6. Add up the CAP figures and check they equal the total.

Common mistakes in Accounting Periods and Long Periods of Account

  • Treating an 18-month period of account as one CAP.

    Students assume the CAP always matches the accounts.

    Fix: A CAP can never exceed 12 months. Always split a long period into 12 months and the balance.

  • Time-apportioning trading profit after deducting capital allowances.

    Students apportion the final figure from the adjusted profit working.

    Fix: Apportion profit before capital allowances, then deduct each CAP's own capital allowances, which are calculated separately.

  • Time-apportioning a chargeable gain.

    Students apply the same fraction to every item.

    Fix: A gain falls in the CAP in which the disposal occurred. Only trading profit (and property income) is time-apportioned.

  • Using the full £50,000 and £250,000 limits for a short CAP.

    Students forget that limits depend on the length of the period.

    Fix: Multiply the limits by months ÷ 12 for any CAP shorter than 12 months.

  • Making the first period the short one.

    Students split the months the wrong way round.

    Fix: The first CAP is always the 12-month one. The remainder is the second CAP.

Worked examples

Example 1

Tilly Ltd prepares accounts for the 18 months from 1 January 2025 to 30 June 2026. Its adjusted trading profit for the period, before capital allowances, is £900,000. Capital allowances are £90,000 for the first 12 months and £15,000 for the last 6 months. State the CAPs and the trading profit of each.

Show the solution
  1. The period of account is 18 months, which is over 12 months, so it is split into two CAPs.
  2. CAP 1: 12 months from 1 January 2025 to 31 December 2025. CAP 2: 6 months from 1 January 2026 to 30 June 2026.
  3. Time-apportion profit before capital allowances: CAP 1 = £900,000 × 12/18 = £600,000.
  4. CAP 2 = £900,000 × 6/18 = £300,000.
  5. Deduct capital allowances: CAP 1 = £600,000 – £90,000 = £510,000.
  6. CAP 2 = £300,000 – £15,000 = £285,000.

Answer: CAP 1 (1 January 2025 to 31 December 2025) trading profit is £510,000. CAP 2 (1 January 2026 to 30 June 2026) trading profit is £285,000.

Example 2

Bram Ltd has a 15-month period of account from 1 April 2025 to 30 June 2026. Adjusted trading profit before capital allowances is £750,000. It sold a building on 10 September 2025 for a chargeable gain of £120,000. Capital allowances are nil. State the CAPs and the profits chargeable in each, before any other reliefs. Also state the upper limit for the second CAP.

Show the solution
  1. The period is 15 months, so there are two CAPs.
  2. CAP 1: 12 months from 1 April 2025 to 31 March 2026. CAP 2: 3 months from 1 April 2026 to 30 June 2026.
  3. Trading profit CAP 1 = £750,000 × 12/15 = £600,000.
  4. Trading profit CAP 2 = £750,000 × 3/15 = £150,000.
  5. The gain arose on 10 September 2025, which is in CAP 1, so it is not apportioned.
  6. CAP 1 chargeable profits = £600,000 + £120,000 = £720,000. CAP 2 = £150,000.
  7. Upper limit for CAP 2 = £250,000 × 3/12 = £62,500.

Answer: CAP 1 (1 April 2025 to 31 March 2026) has chargeable profits of £720,000. CAP 2 (1 April 2026 to 30 June 2026) has £150,000. The upper limit for CAP 2 is £62,500.

Exam tips

  • Always write the dates of each CAP at the top of your answer. Marks are given for correct periods.
  • State the months and the fractions, such as 12/18, so the marker can follow your working even if the arithmetic is wrong.
  • Remember the supplementary instruction: apportion to the nearest month and show all workings in Section C.
  • In objective test questions, check whether the question asks for the length of a period or the profit in it before you calculate.
  • Revisit the rates and limits for short periods when you study marginal relief, because the two topics are often examined together.

Practice questions from The comprehensive computation of corporation tax liability

Accounting Periods and Long Periods of Account in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Accounting Periods and Long Periods of Account: frequently asked questions

When does an accounting period for corporation tax start and end?

It starts when the company comes within the charge to corporation tax or when the previous period ends. It ends on the earliest of 12 months after it started, the end of the period of account, the company starting or ceasing to trade, or ceasing to be within the charge.

How do I split an 18-month period of account?

Make the first CAP the first 12 months and the second CAP the remaining 6 months. Time-apportion trading profit before capital allowances by 12/18 and 6/18. Then deduct each period's capital allowances.

Can a chargeable accounting period be longer than 12 months?

No. A CAP can never be longer than 12 months. If the period of account is longer, it is split into a 12-month CAP and a CAP for the balance.

Do I time-apportion all income in a long period of account?

No. Trading profit and property income are time-apportioned. Interest income is allocated on an accruals basis, and chargeable gains are put in the CAP in which the disposal occurred. Capital allowances are calculated separately for each CAP.