HMRC clarifies availability of overlap relief calculation

HMRC clarifies availability of overlap relief calculation

Jan 3, 2024

Overlap relief information for basis period accounting can only be provided if the business’ profit and loss figures are recorded in HMRC systems

HMRC has confirmed that it can only make the calculations based on information submitted by taxpayers as part of previous year tax returns. This follows the launch of the online overlap relief tool last month.

‘If this information has not been submitted in tax returns, HMRC will not be able to provide it. However, in these circumstances, it may be possible to provide historic profit figures, to allow overlap relief to be recalculated,’ HMRC told employers in the latest bulletin.

The correct calculation of overlap relief is a critical element of the changes to basis period reform, which affect tax years from 1 April 2023 and means many taxpayers will have to calculate and report transition profit.

If you are a sole trader, self employed or a partnership, have an accounting date other than 31 March or 5 April, and are affected by the move to the new tax year basis, it is likely that you will have to find out the details of your overlap relief.

It is important to note that you will need to get the overlap relief figure ahead of submitting returns for the 2023 to 2024 transitional tax year.

Businesses that have overlap relief which they should have used in the past but did not, may also use this in the 2023-24 tax year.

The transitional part of the profits will be spread equally over five tax years starting in 2023-24.

Accountants can request an overlap figure for clients and once a submission has been made, HMRC will send a confirmation letter or email with a submission reference.

HMRC said it will take up to three weeks to review the information so it is important to start the process in good time to avoid delays.

The form is available at Get your Overlap Relief figure via the green Start button halfway down the page. As the page states users will ‘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)’.

When preparing to fill out the online form for details about overlap relief, make sure that you have the following information:

  • customer name;
  • Unique Taxpayer Reference Number (UTR) or National Insurance number;
  • name or description of business, or both;
  • whether the business is a sole trader or part of a partnership;
  • if the business is part of a partnership, the partnership’s UTR;
  • date of commencement of the self-employed business, or date of commencement as a partner in a partnership (if not known, then the tax year of commencement);
  • the most recent period end date up to which the business used to report its profit or loss; and
  • years the accounting period changed, if applicable.

A tax year is a 12-month period which runs from 6 April in one year to 5 April in the following year, so the 2024-25 tax year runs from 6 April 2024 to 5 April 2025.