BIM81095 - Computation of liability: overlap relief - given on cessation
S205 Income Tax (Trading and Other Income) Act 2005
Any overlap relief not used on a change of accounting date (see BIM81090) is given in full in the tax year in which the business ceases.
Example
The business in the example at BIM81090 ceases on 31 May 2020. The overlap profit available for relief is 拢25,002.
The basis periods for the final 2 years are:
Year |
- |
- |
|---|---|---|
2019-2020 |
Year 10 |
12 months to 31 October 2019 |
2020-2021 |
Final year |
7 months from 1 November 2019 to 31 May 2020 |
The profits for the 7 months to 31 May 2020 are 拢80,000. Overlap relief for the remaining overlap profits (拢25,002) is deducted to give taxable profits for 2020-2021 of 拢54,998.
The total profits taxed over the life of this business will exactly equal the total profits made.