Overlap Relief can be used in the 2023 to 2024 tax year if your accounting end date:
- – does not align with the tax year (accounting dates between 31 March and 5 April align with the tax year)
- – has been changed to align with the tax year, but you did not use any Overlap Relief due
- – was changed during the 2023 to 2024 tax year, but does now align with the tax year
If you have stopped trading in the 2023 to 2024 tax year you can still include Overlap Relief in your return for that year.
Section 19 of how to calculate your taxable profits (Self Assessment helpsheet HS222) explains how to include Overlap Relief in your tax return.
Basis Period Reform new rules
Generally, businesses draw up annual accounts on the same date each year, called their ‘accounting date’. Currently, a business’s profit or loss for a tax year is usually the profit or loss for the year up to the accounting date in the tax year, called the ‘basis period’.
Specific rules determine the basis period in certain cases, including during the early years of trading. These rules can create overlapping basis periods, which charge tax on profits twice and generate corresponding ‘overlap relief’ which is usually given on cessation of the business. Overall, this basis of taxation is called the ‘current year basis‘. We cover this in further detail in a separate article here.
Basis period reform is part of the MTD for ITSA rules that will apply from April 2024, but you could save time in the long run by starting preparing for upcoming changes and the transition is likely to run more smoothly if you start preparing ASAP. We have covered those upcoming changes in a separate article here.
How to work out your Overlap Relief figure
Your Overlap Relief figure may already be entered as Overlap Profit Carried Forward on a previous Self Assessment return form if it included:
- – trading income on Self Employment (SA103)
- – trading income on Partnership (SA104)
- – both trading income on Self Employment and Partnership
If you do not know your Overlap Relief figure, and you cannot find it on your previous Self Assessment returns, HMRC may be able to help.
Do not use this service if you are working as a trust, estate, or non-resident company that has trading income, contact HMRC to find out how to get your overlap relief figure.
Before you start
You’ll need to sign in with your Government Gateway user ID and password for Self Assessment (if you do not have a user ID, you can create one when you first try to sign in).
If you are an agent acting on your client’s behalf, you’ll need to sign in to your Agent Services Account or your Online Services for Agents Account. You must submit a separate request for each client.
You will need to give:
- – your name
- – the name or description of your business (or both)
- – your business address
- – your Unique Taxpayer Reference (UTR)
- – details of whether your business is a sole trader or part of a partnership
- – the partnership’s UTR if your business is part of a partnership
- – the date your self-employed business or being a partner in a partnership began (if not sure, the tax year this began)
- – the most recent period of account or basis period used by your business
- – the year or years the accounting period changed (if applicable)
You will be asked for contact details and whether you would like to receive a response by letter or email.
After you have requested your Overlap Relief figure
HMRC will send you a confirmation letter or email with your submission reference.
If you have received a confirmation email, the reply will contain the following details so you can be sure it has come from HMRC:
- – a UTR, redacted to show the last 4 characters
- – the first initial of your name
- – your last name
HMRC will review the information you have given them and contact you within 3 weeks. This may take longer if your case is complex.
How can MCL Accountants help?
Contact MCL Accountants on 01702 593 029 if you have any queries on overlap relief or if you need any assistance with the preparation and submission of your business accounts or self-assessment tax returns to HMRC.
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Ishan provides financial management, taxation and transactional advice to business entities of all sizes. His expert areas include statutory compliance, business taxation, personal tax & transactional processing and systems. Industry sectors include professional services, retail, hospitality and entertaining & media and advertising services.