Do overlap profits include class 4 NIC

Do overlap profits include class 4 NIC

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Hello

I am doing my first overlap relief claim as I am changing my clients self assessement year end to 5th April.

Her overlap profits go back 14 years to 01/02 and the old accountant has no record of what was submitted so I will pro rate the tax accordingly going by the 2002 accounts. Do I include class 4 NIC in my overlap relief calculation?

Thank you

Leigh

Replies (15)

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By mike01
17th Jan 2017 12:41

This information should still be held in HMRC's records.You should ring the agent helpline.

Thanks (1)
By Paul D Utherone
17th Jan 2017 13:06

How are you intending to do this?

The Overlap Relief is a figure for profits that were assessed twice originally in getting to the standard basis of assessment.

The relief is deducted from the profits assessable in the year of change so will reduce tax & class 4 in that year.

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By possep
17th Jan 2017 13:54

You have given insufficient information to enable anything resembling a sensible answer being given. What is the current year end. What period did the original accounts cover? It seems from your post that you have not realised the method for calculating the O/L relief and what is released on the change of the accounting date.

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RLI
By lionofludesch
17th Jan 2017 13:58

You won't have enough information to do this from the accounts. You'll need the tax adjusted profit.

Get it from HMRC. Don't think they won't have this and you can submit any old figure. They know they'll need this information one day and they've recorded it.

And - yes - you get Class 4 relief too, as Paul says.

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By LeighM
17th Jan 2017 15:30

Hi. I called HMRC helpline and they only go back as far as 08/09 (or so the person who I spoke to advised). They said they cannot access those records?!? Maybe I should call again.
The client is operating a June year end and I will change this to 5th April all going to plan. The year end will be 5th April 16.
They started trading July 01 with a year end date June 02. Accounts were drawn up to June 02 with profits of £10,022. The overlap period is therefore July 01 - April 02.
The amount will be not very significant, I just wanted to make sure that I was doing it correctly and pro rating is clearly not the way.
Thanks

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Replying to LeighM:
RLI
By lionofludesch
17th Jan 2017 16:39

LeighM wrote:

Hi. I called HMRC helpline and they only go back as far as 08/09 (or so the person who I spoke to advised).

Around £7500 overlap ? I'd say that's significant.

What did you ask for ?

The overlap relief ? Or the profits for the 2001/02 season so that you can work out the overlap relief from that ?

They'll have the former. Definitely.

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Replying to lionofludesch:
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By LeighM
17th Jan 2017 20:06

I asked for a copy of the self assessment for 01/02.
I will try again in the morning and ask for the overlap relief as you suggest.
Thank you.

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By Duggimon
17th Jan 2017 16:26

Could always try sticking in £100K overlap relief, I'm sure HMRC would then miraculously find the correct figure.

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Replying to Duggimon:
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By lionofludesch
17th Jan 2017 16:51

Great idea.

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By possep
17th Jan 2017 19:42

So assuming the 2015/16 current year end is the year ended 30 June 2015 you are proposing preparing additional accounts for the period July 2015 to March 2016. You may find that you increase the assessable profit for 2015/16 even after overlap.

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Replying to possep:
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By LeighM
17th Jan 2017 20:16

The previous Accountant prepared to the 30th June 2015 and all of that year is included in the 14/15 self assessment. I can see how that is wrong, but will therefore only be calculating tax on 01st July to 5th April less overlap. I will make notes on the return about what I have done to cover myself, unless I hear otherwise that's not what to do.

Thank you for your help.

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Replying to LeighM:
By Paul D Utherone
17th Jan 2017 22:25

If the old accountant was using completely the wrong basis period, how did he get to that and will there actually be any profits that have been assessed twice to create overlap!?

Submitting 9 months, AND taking off an overlap figure sounds like a recipe for getting it even more wrong.

Sounds like you need to go back to the old accountant again and find out what he has been doing because something in not right

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Replying to LeighM:
RLI
By lionofludesch
18th Jan 2017 09:09

LeighM wrote:

The previous Accountant prepared to the 30th June 2015 and all of that year is included in the 14/15 self assessment. I can see how that is wrong, but will therefore only be calculating tax on 01st July to 5th April less overlap. I will make notes on the return about what I have done to cover myself, unless I hear otherwise that's not what to do.

Thank you for your help.

Sorry, you've now convinced me that you have no idea of the principles involved here.

If the old accountant has included the June 2015 profits on the 2015 return, there's a lot more wrong than just the overlap relief. What date entries were made on the returns ? Presumably the returns were filed on paper as the software would have picked up a June 2015 year end on the 2015 tax return.

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By SteveHa
18th Jan 2017 10:40

If the previous accountant has used the wrong accounts for the 2015 Return is it not reasonable to suspect that he has done so for every year since commencement, in which case there will be no overlap.

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Replying to SteveHa:
RLI
By lionofludesch
18th Jan 2017 11:11

Well, we'd need more information on that.

Maybe a whole year's profits have been left out somewhere. We'll never know, will we ?

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