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HMRC internal manual

Business Income Manual

Partnerships - computation and assessment: other income: losses and overlap relief


In 2012/13 Sarah retires from a professional partnership. Her shares of partnership income for the year, and details of both losses and overlap profits brought forward, are as follows

  Profit 2012/13 Losses b/f Overlap profit b/f Net profit/(loss)
Trading income £5,000 nil £(1,750) £3,250
Notional business        
Savings income £500 - £(200)  
Miscellaneous income £4,000 £(1,000) £(2,000)  
Property income £750  nil  £(4,000)  
Totals £5,250 £(1,000) £(6,200)  

In addition Sarah has non-partnership income in the year as follows

Dividends and other taxed savings income £5,300
Pension £11,450

Sarah’s partnership share of the savings, miscellaneous and property income counts as profits from her notional business. The overlap profit associated with that notional business totals £4,250 after deduction of losses brought forward.

The overlap profit of £6,200 associated with the notional business cannot be absorbed in full this year. Therefore Sarah has excess overlap profit of £1,950.

The balance of notional business overlap profit is given as a deduction from any other income for the year

Net profit 2012/13

Trading income £3,250
Dividends and other taxed savings income £5,300
Pension £11,450
Balance of notional business overlap profit still unrelieved £(1,950)
Net total £18,050