Anonymous
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Overlap Profit i understand but overlap Loss?

How to deal with a basis perid with a loss ?

Hi Guys ive got an odd situation and would appreciate some common sense advice incase im overthinking it.

We have taken over a client. Prev tax return (2016/17) shows a loss for the year as -12,637 however due to the basis period adjustment the adjusted loss shown is -8132.

Under normal circumstances (where there is a profit) for the 2017/18 tax return the -8132 (had it been a profit) would have been shown as an overlap profit and the -12367 as the taxable profit. But as it is a loss in this example and as we cant show a negative profit i wonder if anyone can advise?

Perhaps its straightforward and on a Friday and 5.45pm im missing the obvious but as the client has taken advantage of the -8132 loss of the -12637 he cant take the advantage of it in both years just like you cant of the profit and hence have the overlap profit

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11th Jan 2019 18:27

You are correct.

So why be anonymous?

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12th Jan 2019 09:42

I think you have the answer but your reasoning's out.

I'm guessing that this period where he reported the loss is the taxpayer's first year (or period) of trade.

There's no such thing as an overlap loss. What your client has there is a profit of £0 and no overlap relief.

The loss is dealt with completely separately. I'm not sure I've completely grasped the situation, owing to the lack of dates, but it looks to me like he has a loss of £8132 in one year and £4505 in the other. These losses are treated just like any other losses (carry forward, back, sideways, early years); you don't have to treat both losses in the same way, don't forget your Class 4 losses (usually carry forward is your only option here as they can only be used against self employment).

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11th Jan 2019 18:58

There are some caveats, eg to do with accounting dates and basis periods, but https://www.accountingweb.co.uk/any-answers/new-years-resolutions-3

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to Tax Dragon
12th Jan 2019 09:43

Yeah, but you broke that resolution 5 hours and 10 minutes into the New Year.

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to lionofludesch
13th Jan 2019 23:15

They don't kick in until after your first sleep.

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