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HMRC internal manual

Business Income Manual

Computation of liability: overlap relief - given on cessation

S205 Income (Trading and Other Income) Act 2005

Any overlap relief not used on a change of accounting date (see BIM81090) is given in full in the tax year in which the business ceases.


The business in the example at BIM81090 ceases on 31 May 2020. The overlap profit available for relief is £25,002.

The basis periods for the final 2 years are:

2019-2020 Year 10 12 months to 31 October 2019
2020-2021 Final year 7 months from 1 November 2019 to 31 May 2020

The profits for the 7 months to 31 May 2020 are £80,000. Overlap relief for the remaining overlap profits (£25,002) is deducted to give taxable profits for 2020-2021 of £54,998.

The total profits taxed over the life of this business will exactly equal the total profits made.