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Reverse overlap

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05 November 2008
Issue: 4183 / Categories: Forum & Feedback
A self-employed trader has a substantial amount of overlap relief that will create a loss on cessation. When is it possible to make the claim to loss relief — can this only be made on the tax return for the year — and what effect will a terminal loss claim have on self assessment tax payments?

A problem with the longer-term self employed is the potential for a high level of profit being assessed at cessation with little 'overlap' relief. My client has the reverse problem having a large overlap being carried forward as compared to his current profits. He intends to retire shortly and I am trying to anticipate the potential use of the terminal loss that I expect to arise. I would like to ensure that he does not pay tax unnecessarily but I recall that problems used to arise with due dates and interest entitlement when it used to be possible to carry back pension premiums. Will the same problem arise with terminal loss claims (or to an ITA 2007 s 64(2)(b) or TA 1988 s 380 claim) against general income?

If say the client retires in 2008-09 the terminal loss will wipe out the...

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