Online service to check overlap relief for basis period transition

HMRC is set to launch an online service to make it easier to find out tailored information about claims for overlap relief due to the introduction of basis taxation rules

Sara White, Editor, Accountancy Daily

An online form will be available from 29 August on the HMRC website.

At the moment, sole traders, partners and accountants need to phone HMRC or send them a letter asking for overlap relief, which goes in the face of HMRC’s attempts to digitise the tax system, while long waiting times to speak to an HMRC agent means that it is impractical if not impossible to make the arrangements.

A new online form will allow self employed taxpayers and their accountants to request the information HMRC holds on the overlap relief available to them when they transition to the tax year basis of taxation during the new tax year, 2023-24. The changes to basis tax reporting mean that there are complicated straddling tax year rules to follow.

The information will be required when submitting self assessment tax returns for the transitional tax year, 2023-24.

The rule change on basis period reporting affects self employed individuals if their accounting year end is not 31 March or 5 April.

Members of the ICAEW tax faculty said the ‘online form should speed up delivery and allow businesses and agents the information they need more quickly’.

The form may be used to request information for whichever tax year a change of basis takes place in, ICAEW said.

For example, a business with an accounting year end outside of the 31 March to 5 April window may decide to align its accounting year with the tax year in 2022-23. If it does not, it will be moved onto a tax year basis of taxation by default in the transitional year 2023-24.

ICAEW warned: ‘Either way, a transitional profit or loss is likely to be created and overlap relief can be used to off-set any transitional profit.’

Following last year’s consultation on the transition issues, earlier this year HMRC confirmed that businesses looking to change accounting date in the 2021-22 tax year HMRC will be able to provide details of overlap relief figures or historic profit figures on request, if these figures are recorded in HMRC systems.

At the time, HMRC said: ‘Businesses looking to change accounting dates or use overlap relief in 2022-23 or 2023-24 should wait until we are able to provide further information on overlap relief support for these businesses and agents; we are planning to provide certainty on this in the coming months.’