Question Tag: Basis Period

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  • 10 Marks

PT – Mar 2024 – L2 – Q3c – Income Tax Liabilities

Compute the assessable income for all relevant years for Hajia Bintu after ceasing operations.

Hajia Bintu has been in business from 1 September 2018, preparing accounts to 31 August each year. She ceased to operate the business on 31 May 2023. The agreed profits for the past years of operations are as follows:

Year Agreed Profits (GH¢)
Year to 30/8/2019 18,000,000
Year to 30/8/2020 23,000,000
Year to 30/8/2021 28,000,000
Year to 30/8/2022 33,000,000
Period to 31/5/2023 50,000,000

Required:
Calculate the assessable income for all relevant years.

Computation of Assessable Income for Hajia Bintu for all relevant years

  • 6 Marks

PT – Mar 2024 – L2 – Q3b – Income Tax Liabilities

State the basis periods for a sole proprietorship, company, trust, and partner in a partnership.

State the Basis Periods for the following persons as provided in the Income Tax Act, 2015 (Act 896):

i) A sole proprietorship
ii) A company
iii) A trust
iv) A partner of a partnership

The Basis Periods for the different persons are as follows:

i) Sole Proprietorship: The basis period for a sole proprietor is the calendar year (January to December).
ii) Company: The basis period for a company is its accounting year, which may vary depending on the company’s financial reporting period.
iii) Trust: The basis period for a trust is the accounting year of the trust.
iv) Partner of a Partnership: The basis period for a partner in a partnership is the calendar year (January to December).

  • 4 Marks

PT – Mar 2024 – L2 – Q3a – Income Tax Liabilities

Distinguish between the Year of Assessment and Basis Period as used in income taxation.

The determination of a person’s tax liability is in relation to the concept of “Year of Assessment” and “Basis Period”.

Required:
In relation to the statement above, distinguish between the concept of Year of Assessment and Basis Period as used in income taxation.

  • Year of Assessment:
    The Year of Assessment refers to the income tax year or the period in which taxes are levied or collected. In Ghana, the Year of Assessment follows the calendar year from January to December.
  • Basis Period:
    The Basis Period is the specific time reference used to compute the assessable income of a person. It is a period not exceeding 12 months, although it can be shorter during commencement and cessation years of business operations. It is the timeframe within which income earned is assessed for tax purposes.

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