HMRC Clarifies Overlap Relief Calculation Process for Taxpayers

In a recent update, HMRC has provided crucial information regarding the calculation process for overlap relief, an essential component of the changes brought about by the basis period reform, applicable from 1 April 2023.

This reform impacts businesses, particularly sole traders, self-employed individuals, and partnerships, with accounting dates other than 31 March or 5 April.

Overlap Relief Calculation

HMRC has clarified that overlap relief calculations are contingent upon the accurate recording of a business's profit and loss figures in HMRC systems. The calculations are based on data submitted by taxpayers in their previous year tax returns.

Notably, HMRC can only provide overlap relief if the necessary information has been accurately submitted in tax returns. If this data is missing, HMRC may assist by providing historic profit figures, allowing for the recalibration of overlap relief.

Obtaining Overlap Relief Figure

To obtain the overlap relief figure, businesses must fill out an online form available on the HMRC website. Accountants can also request this figure on behalf of their clients. However, it is crucial to initiate this process well in advance as HMRC requires up to three weeks to review the provided information.

Conclusion

Understanding the intricacies of overlap relief calculation is vital for businesses transitioning into the new tax year basis. By following HMRC’s guidelines and providing accurate information, taxpayers can ensure a smooth process and avoid delays in their tax filings.

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