Hello, so before I change a 30 April year-end to 5 April I have requested 1997/98 copy Tax Return from HMRC. Now, if I understand this right then my calc of overlap profits disagrees with the memo of overlaps received from client's former accountant. All help appreciated:
Per 1997/98 SA Return: Net profit £10,734, add-back disallowable expenses of £364 = £11,098.
There were also CA's claimed of £112 giving £10,986 taxable profit.
I would calc overlaps as £11,098 (ignoring CA's) x 340/365 = £10,337.
The memo from the client's former account stated that overlaps b/f were £9,433 for 340 days.
Even including CA's give overlaps of £10,233. No where near the memo of £9,433.
Am I missing another possibility? What figure would claim against this year's profits (once I change YE)?
Thanks
Replies (15)
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Date of commencement of trade?
Your calculation is of transitional overlap relief.
If trade started 1/5/94 the overlap year is 1995/6 or for 1/5/95 it is 1996/97.
The profit figure to use in this case is after capital allowances.
It seems a little unlikely, but ...
.... could they have changed their accounting date twice since 1998? Once to 31 March and then back to 30 April?
With kind regards
Clint Westwood
Final checks
I would ask HMRC if the return they have sent you was an amended return as it is possible the memo relates to a different set of figures.
Given the length of time trading I would then have to assume the previous accountant got it wrong.
This is a very common problem - you have the figures HMRC will be checking your calculations against and it is in your client's favour so go with it.
@chewmac
I am not sure if a return is amended by letter as opposed to re-filing whether the copy they send you is the original or the amended.
Contact difficulties
are annoying - the alternative is to go with your figures but explain to client that as you have based it on information provided by HMRC you assume it is accurate but that the technical review may create a small difference if you were given inaccurate figures to work with
Good result
I am glad you found someone who knew what you were talking about.
I am sure they could have helped before too!
Current year basis throughout
Commencement 1/9/96
First year is rightly y.e. 31/8/97
1996/97 = y.e.31/8/97 x 217/365 of the profit after capital allowances
1997/98= y.e. 31/8/97
Overlap is 217 days in the amount of the portion taxed in both years.
If you now have 30/9 there must have been a prior change of accounting date so another phone call to HMRC will be needed. Potentially there is another 30 days.
When they tell you when the date first changed just check that that return was submitted on time and then ask for a copy. If it was late then ask for a copy of the next year too.