Overlap Relief – claim it or lose it.

Overlap Relief – claim it or lose it.
Preparing for the new tax year basis

What is overlap profit?
In the opening years of a business, some profits may have been taxed twice. Where this occurs, some profits may be taxed in both year 1 and year 2. These are overlap profits. Overlap profits can also arise from a change of accounting date. Where this happened, a note of these profits should have been kept to claim relief at a later date.

There is now a limited window for claiming any overlap relief arising for any profits which may have been taxed twice.

The move from the current year basis to the new tax year basis brings with it an end to overlap profits and overlap relief.  As a result of the move to the tax year basis, the current year basis ceases to apply beyond 2022/23.  The 2023/24 year is a transitional year between the old basis and new basis.  It is also the last chance to claim any relief on overlap profits.

If you did not keep a note of any  overlap relief arising, HMRC recently launched an online form for submitting requests for details about overlap relief. This provides an easier way to submit requests making sure that these are channelled and dealt with appropriately.

HMRC will be publishing additional guidance on overlap relief and changes to the rules for the new tax year basis. The guidance on changes to reporting income from self-employment and partnerships is available on GOV.UK.

If you would like more details about preparing for the new tax year basis or assistance with overlap relief, please get in touch.