Overlap Relief

How is this screen accessed:

Overlap relief is given in the closing year or when there is a long basis period on change of accounting date.

Overlap relief is computed automatically by IRIS based on the overlap profits brought forward. If the relief is not given when expected check the following:

• If a cessation, check that the trade computation includes the words 'closing year computation' when defining the basis period. To mark the business as ceasing, sole trades require a trading ceased date to be entered, partnerships require an involvement date left.
  
• Also check that the overlap profit brought forward has been entered, together with the number of days (0 days means no overlap).

In the year of cessation all the overlap relief will be deducted from the taxable profit (or augment or create a loss). When there is a change of accounting date that results in a long basis period, part of the overlap profit may be given as a relief. The amount used is in proportion to the number of days that the basis period exceeds 12 months.

For example; if the overlap profit stored is 279 days to a value of 7,643 and the accounting date is changed from 30/6/98 to 31/12/99 the basis period for 1999/2000 will be 549 days long, which is 184 days longer than normal. The overlap relief given would be 7,643 x 184/279 = 5,040 leaving overlap profit remaining unused of 95 days, 2,603.

Overlap profit is a term used to describe a part of a basis period that has been taxed twice. An overlap will nearly always occur in the second year of trading. The overlap profit is stored until overlap relief may be claimed.