The online form for requesting overlap relief information for basis period reform is now live.

Overlap profits normally arise in the first two tax years of a new trade where the accounting date of the business does not align to the tax year end and – under the old opening year rules – profit for the period of overlap fell into tax twice. Details of overlap relief should be brought forward each year on the self-assessment tax return and can be deducted either in the final year of trading, or if the accounting date is changed. Overlap relief will now be used to reduce additional taxable profits in the tax year 2023-24 due to basis period reform.

Under basis period reform, from the year 2023-24 taxpayers are required to report their taxable profits to HMRC in line with the tax year end. Where the accounting year end falls outside the period 31 March to 5 April this will result in additional profits being taxed between the end of the accounting period in 2023-24 and 5 April 2024.

Any overlap relief included on the 2024 tax return will be automatically deducted from the additional profits and the remaining ‘transitional part’ spread over the five tax years 2023-24 to 2027-28. You have the option to accelerate the taxation of the transitional part if you prefer and there are various circumstances where this may be beneficial. We can help you decide how best to allocate your additional profits.

Details of any overlap relief brought forward should be entered on the 2023-24 tax return. If this information has not been retained, we can obtain it from HMRC using the new online tool.

HMRC can only provide historical information on overlap profits if it was reported on past tax returns. If that data is not available in the system, do not worry. HMRC should be able to provide enough data for us to calculate the overlap relief available.

It usually takes around 3 weeks for HMRC to respond to requests for details of overlap relief, but complex cases can take longer so it is important to get the ball rolling and apply for any missing information now. We can do this for you.