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HMRC internal manual

Business Income Manual

Computation of liability: overlap relief - given on change of accounting date

S220 Income (Trading and Other Income) Act 2005

Overlap relief is given as a deduction in calculating the profits of the trade for the tax year in which there is a change of accounting date, if the basis period for that tax year is longer than 12 months.

The amount of overlap relief given for the tax year in which such a change of accounting date occurs is restricted by reference to:

  • the number of days in the overlap period(s) to which the overlap profits relate; and
  • the number of days by which the basis period for the relevant tax year (in which the change of accounting date occurs) exceeds 12 months.

Where the accounting date in the year is 31st March or 1st – 4th April inclusive, the basis period may treated as ending on 5th April for the purpose of calculating the amount of relief.


The business in the examples at BIM81080 continues for several more years. The overlap profit available for relief after 2016-2017 is £54,492 over 340 days.

In 2018-2019 the accounting date is changed again from 30 April 2018 to 31 October 2018. The relevant conditions for a change of accounting date are met.

The basis periods are:

2017-2018 Year 8 12 months to 30 April 2017
2018-2019 Year 9 18 months to 31 October 2018
2019-2020 Year 10 12 months to 31 October 2019


The profit for the 18 months to 31 October 2018 is £120,000.


Overlap relief given for 2018-2019 is restricted (because at least 12 months worth of profit must be brought into the charge to tax for that year).

The basis period for 2018-2019 exceeds 12 months by 184 days (549 less 365).

Overlap relief for 2018-2019 is restricted to £54,492 x 184/340 = £29,490. Profits taxable for 2018-2019 are £120,000 less £29,490 = £90,510.

Overlap profit of £25,002 (over 156 days) remains unused. At cessation any remaining relief will be given in full.