The allocation of accounting profits to basis periods for tax purposes was reformed by FA 2022, s 7, Sch 1 and ITTOIA 2005, ss 196–220 (Ch 15) is repealed from the tax year 2024/25. The rules which apply for the tax year 2024/25 onwards are set out in B8.101A and the rules for the transitional tax year of 2023/24 including the utilisation of overlap profit are set out in B8.101B. The details below therefore only apply for tax years up to and including 2022/23 or for businesses that cease in 2023/24.
Due to the method by which profits in a basis period are allocated to a particular tax year there may be instances where the same profits are taxed more than once.
These profits are known as 'overlap profits' as they arise in an 'overlap period' (ie, a period which falls within two basis periods)1.
Calculation of overlap profits
Overlap profits will usually arise in the early years of a trade or because of a change of accounting date.
Example
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