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Tony Tax
Tony Tax, Tax Consultant
Category: UK Tax
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Calculation of overlap relief on cessation of business. Business

Resolved Question:

Calculation of overlap relief on cessation of business.

Business ceased 31 Aug 2008. Accounts year end is usually 31 May.

Basis period is therefore 15 months to 31 Aug 2008. Loss for this period = 19,947.00

Business commenced in 1991.

I was told that overlap relief should be claimed for the tax year ending 1997 - is this correct ? If so how do I calculate it ?

net profits yr ending May 1995= 24,203
net profits yr ending May1996 = 42,778
net profit yr ending May 1997 = 58,978
net profit yr ending May 1998 = 81,547
Submitted: 7 years ago.
Category: UK Tax
Expert:  Tony Tax replied 7 years ago.
The transitional overlap relief was supposed to be calculated at the time and shown on every tax return since.

Take a look here on page 6 for the logic behind transitional overlap relief.

The last day of your 1996/97 basis period is 31 May 1996 so the transitional overlap period is 1 June 1996 to 5 April 1997, 309 days. So, the actual transitional overlap relief is 309/365 x the pre capital allowances profit for the year ended 31 May 1997.
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