Online process for claiming overlap relief delayed

Online process for claiming overlap relief delayed

Aug 28, 2023

HMRC has delayed the launch of an online service to help sole traders, self employed and accountants calculate overlap relief due to basis accounting rule change

The original 31 August launch date has been pushed back to 11 September as HMRC has come up against some technical issues in the design of the online service.

The new service is designed to provide a mechanism for HMRC to quickly advise the amount of overlap relief which can be claimed by self employed, sole traders and partnerships when the reporting dates change due to changes to the basis period tax year accounting.

At the moment claims have to be made by post which leads to long delays in receiving confirmation of the amount due.

Craig Moulden, head of digital engagement at HMRC, said: ‘It is important to us that the process for claiming overlap relief works well and is easy for you to use.

‘Our testing has highlighted the need for us to make some further refinements to the online service. This means that the service will now be available from 11 September 2023.

‘We’re sorry for this short delay in the launch of the service and any inconvenience for you and your clients.’

From 6 April 2023, the new tax year basis applies. This means profits will need to be reported up to the tax year end, even if the accounting year ends at a different time. As a result profits may need to be apportioned between accounting periods.

Taxpayers with an accounting date other than 31 March or 5 April who are affected by the move to the new tax year basis need to calculate their overlap relief and HMRC has to confirm that the figure is correct. The 2023-24 tax year is known as the ‘transition year’ which means profits will cover more than one year for those affected by the changes.

For example, for those with an accounting year end date of 31 December 2022, profit will be reported from 1 January 2023 to 5 April 2024 in the 2023-24 tax year.

Due to the accounting changes, the figures for overlap relief have to be finalised ahead of submitting returns for the 2023 to 2024 transitional year.

In a recent update for tax agents, HMRC said: ‘Overlap relief information can only be provided if these figures are recorded in HMRC systems, taken from information submitted by taxpayers as part of previous tax returns.

‘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 has not yet produced detailed guidance on overlap relief and changes to rules for the new tax year basis. At the moment some information is available but HMRC has not yet set a date for release of the full guidance.