BTC - Overlap Profits

cat23 Registered Posts: 7 New contributor 🐸
I am really struggling to understand the concept !

Can anybody help?


  • noodles
    noodles Registered Posts: 308 Dedicated contributor 🦉
    How it works is that if you start a business that does not run from 01.04.xx to 31.03.xx it does not fall into the tax year end. Therefore you need to calculate the amount that falls into each tax year i.e start business 01.10.09 - 05.04.10 fy10 and then
    01.10.09 - 30.09.10 falls into fy11 but as you have already paid 01.10.09-05.04.10 in fy10 and also in fy11 you have paid that element twice, that is then called overlap profit.
    When the company ceases to trade, you can then deduct that amount back.
    hope this helps
  • EAP
    EAP Registered Posts: 63 Regular contributor ⭐
    You're struggling because it's a really illogical concept. When you start a business you have to pay tax in your first year regardless of what accounting period you set, there are then some more rules about what you pay in the second and third year which basically means you may pay tax twice on the same profits. (hence Overlap Profits)
    this is because the tax man wants some hard cash out of you as quick as they can and can't be bothered to wait until your first set of accounts are ready. (surprise surprise)
    You only pay tax once each year (I think), so it's not entirely unfair, and when you wind up your business you get to knock the tax you paid on your profits twice in year one or two (overlap profits) off your final bill.
    I think that's pretty much it. Hope this helps

    another overcomplicated tax system!
  • valentino46
    valentino46 Registered Posts: 124 Dedicated contributor 🦉

    i really struggle with the year 2 and 3 concept of calculating profits, i draw myself the time line to try and make some sense but my god do i struggle!!

    does anyone have anykind of easy way of remembering this as i know im going to drop marks on this task if in the exam next week.


  • cat23
    cat23 Registered Posts: 7 New contributor 🐸
    Thanks very much
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