Overlap profits not included on earlier return.

Will this prove a problem when relief is required?

Didn't find your answer?

Previous accountant has not documented overlap profits on the 2014/15 partnership tax return.  Due to cessation, relief will be required in 2016/17 but I am concerned that there may be difficulties.  Is it necessary to amend 14/15 tax returns for all 12 partners as well as the partnership or would HMRC be unlikely to kick up a fuss given that it is perfectly obvious from the accounting periods that overalp profts have been created?  I have a feeling that I know the answer to this one but am hoping somebody out there can convince me that I don't have to add 13 tax returns to my ever growing deadline list!  Many tahnks in advance to any/all who can assist.

Replies (12)

Please login or register to join the discussion.

avatar
By Cloudcounter
24th Jan 2017 12:26

Whenever I've inherited jobs with no recorded overlap profits I've simply stuck the figure in as a brought forward on the next return filed and never had any issues. If we don't know the profits, then HMRC have always been able to help

Thanks (1)
paddle steamer
By DJKL
24th Jan 2017 12:32

Why the partnership return?

Given 16/17 you could always ask HMRC re each individual, you have time.

Do you know when each partner became a partner, have they all been partners since inception?

Thanks (0)
Replying to DJKL:
avatar
By dhughes1975
24th Jan 2017 12:42

Sorry, I just meant I would need to complete teh partnership return on our system so that all of the income is fed through to the individual partners. It's just the way our software works.

They all became partners in 2013/14 and I can work out the overlap for each quite easily. I'm just not sure whether I need to complete 14/15 returns (originals not yet supplied by previous accountant and not viewable on HMRC site) for all of them or simply include the overlap as abro ught forward figure on 15/16 as is suggested above.

Thanks (0)
By Tim Vane
24th Jan 2017 12:42

How would you expect the previous accountant to document overlap profits on the partnership tax return? Surely each partner would have their own record, and these won't necessarily be the same.

Thanks (0)
Replying to Tim Vane:
avatar
By dhughes1975
24th Jan 2017 12:44

They all started the partnership on day 1 and share profits equally so they are exactly the same.

The individual's returns do not include any overlap profits created so currently, HMRC would have no record of this.

Thanks (0)
paddle steamer
By DJKL
24th Jan 2017 12:49

Are they equal shares or do you have 12 different calculations?

If the former I would calculate it then insert into b/fwd box on 15/16 individual returns, if you want type a short calculation and then copy/paste this into the white box re each partner.

If the latter then a bit more work.

Thanks (1)
Replying to DJKL:
avatar
By dhughes1975
24th Jan 2017 12:53

All identical. I'll do as you suggest. Am I right in thinking that, as 2016/17 will be well within 4 years, that even if HMRC did query it the partners could all claim credit for the overlap profits retrospectively anyway?

Thanks (0)
Replying to dhughes1975:
paddle steamer
By DJKL
24th Jan 2017 13:13

Does overlap relief need an earlier year timeous claim or is it merely a mechanical calculation?

http://www.legislation.gov.uk/ukpga/2005/5/pdfs/ukpga_20050005_en.pdf

S 204 onward maybe suggests it is mere mechanics of calculation, albeit earlier year tax returns may be wrong.

I will leave the question for Portia/Similar to answer as my knowledge of the Taxes acts re this point is nowhere near good enough.

Thanks (1)
Replying to DJKL:
RLI
By lionofludesch
24th Jan 2017 17:29

I agree that there seems to be no requirement to enter it on the second return (ie, the year in which overlap is created).

However, still a week to go and a "belt and braces" approach is still possible.

Thanks (1)
RLI
By lionofludesch
24th Jan 2017 14:58

For the avoidance of doubt, the overlap relief goes on the personal returns, not the partnership return.

That's because partners may not join at the same time and may not have equal shares - although that doesn't seem to be in point here.

Check with HMRC to see if they've created a record - if not, establish the overlap relief now. Should be pretty easy to recover - it's not all that far back into history.

You still have a week to amend the 2014/15 returns, which are the returns where the overlap should have appeared.

Thanks (1)
By penelope pitstop
24th Jan 2017 17:47

Had the same problem.

Telephoned HMRC and asked for overlap profit figure from years ago and HMRC supplied it no trouble at all.
Think you need to fill in full pages rather than short to record overlap figure though.

Thanks (1)
Replying to penelope pitstop:
RLI
By lionofludesch
24th Jan 2017 17:53

I've tried to shy away from overlaps for partnerships but I believe you're right.

Thanks (1)