Interest on Tax Paid on Overlap Profits

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Is the Tax Paid on Overlap profits classed as overpaid tax, does this mean when you request the credit back HMRC would have to make good interest on holding this overpaid tax ? If someone is late on paying over the tax on the overlap profits, HMRC can charge interest on this late payment so I can't see why they should not pay interest on holding the funds up to the cessation of the partnership. 

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By bajones
21st Jul 2017 16:00

No. Don't be silly. It is to counteract a client's financial gain from manipulating year ends.

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RLI
By lionofludesch
21st Jul 2017 16:49

Think you have the wrong idea about overlap profits.

Overlaps are there to ensure that folk pay tax on profits attributable to the same number of days as they've traded in the tax year.

They're not tax paid in advance as some sort of penalty for having an accounting date early in the tax year.

Overlaps will delay paying tax if profits are rising or accelerate it if profits are falling. Over the life of the business, however, you are assessed on the profits you make.

Too many people relying on software and not understanding what the software does and why.

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By Paul D Utherone
21st Jul 2017 17:42

It's not the tax paid at the outset on profits taxed twice that is repaid on cessation (or change of accounting date), but the profits assessed twice at the beginning that are allowed as a deduction from the taxable profits at cessation.

So it's not a tax credit that is held over the life of the business and then repaid on cessation and your theory falls down

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