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Assessed profits of deceased client

Client self employed for 30 years prior to his death, what is treatment of opening years income?

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My client recently died after 30 years in self-employment. He would have been doubly assessed on the first 9 months of his profits as his year end is in June. He had another accountant for the first 5 years of trading.

Does HMRC make any allowance for indexation on the twice assessed profits?

My logic is that the personal allowance and hence profits would be much lower then than now.

I have no record of the opening accounts.

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By Tax Dragon
06th Aug 2020 10:59

Have a read of this https://www.accountingweb.co.uk/any-answers/ancient-basis-period

No, the amounts are not indexed. (Why would they be?!)

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By Cloudcounter
06th Aug 2020 11:03

The overlap profits would have been calculated when self assessment was introduced, which was around 1997 or there abouts. If you've acted for 25 years then you should have had the figures, and in general they are supposed to be reported on each year's tax return and carried forward, although that frequently doesn't happen.

If you don't have the figures you can write to HMRC to ask if they have a record, and they usually are able to give them to you.

No there's no allowance for indexation. First tax lecture that I ever went to (way before self assessment) and the lecturer told us never to look for or expect logic in tax!

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Replying to Cloudcounter:
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By GLKK
06th Aug 2020 11:14

I seem to remember the logic comment myself, thanks.
I'll contact HMRC.

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Replying to GLKK:
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By Tax Dragon
06th Aug 2020 11:30

If 30 years turns out to be a few less, this thread https://www.accountingweb.co.uk/any-answers/overlap-relief-25 may also help.

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By possep
06th Aug 2020 16:40

This client is actually entitled to transitional overlap relief. If you assume a 30 June year end the account to 30/06/1994 would have determined the liability for 1995/96 on a PY basis which was in force then. The profit for 1996/97 would be the 24 months to 30/06/1996, i.e. the two years profits pre CAs were combined, multiplied by 365/731 as 1996 was a leap year. The accounts for 30 June 97 would be the 1997/98 accounts which create the overlap for the pre 6 April 1997 part of the accounts. 9/12 of the June 97 accounts is the overlap calculated prior to any capital allowances.

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