Utilising overlap relief

Utilising overlap relief

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New client, husband/wife partnership with a business that pretty much breaks even, will probably never make a profit again due to clients age and it has become more of a part-time interest. Year-end is 31 August. Wife has £15k of overlap profits, husband has £10k. The wife is retired and will never have income of more than say £9k from pensions. Husband has pension income of about £30k.

I was looking at extending year-end to 31 March in order to fully utilise overlap relief, for the husband it will be worth it but using overlap relief for the wife will simply waste her personal allowance.

Are there any options that I'm missing? I'm assuming that overlap relief can't be transferred to the husband and also am I correct in thinking that the overlap relief must be applied in the year of accounting date change and can't just be used at say £1k per year over the next x years?

They are unlikely to have any capital gains or any other income to relieve against either.

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By nogammonsinanundoubledgame
10th Jan 2013 06:46

Basically, they are probably pretty stuffed ...

... and it is one of the classical scenarios touted for having a 31 March year end (or being alert when to change).  I note that it is a new client.  Potential law suit against previous accountant may be in the offing.

As for what now; you could stagger the change of ARD over two years provided that the second change is (1) a cessation date or (2) more than 5 tax years after the earlier change or (3) justifiable on non-tax commercial grounds.  Practically, I suspect that option (1) is the only one on the cards.

If three years ago they had some taxable income which would benefit from some loss relief you might engineer a cessation now, generate a loss and carry it back 3 years under the terminal loss provisions.  But this may result in some loss of personal allowances and you would have to number crunch the benefit.

Nothing else springs to mind.

With kind regards

Clint Westwood

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