Guidance

HS260 Overlap relief (2023)

Updated 6 April 2024

This helpsheet contains 2 working sheets:

• working sheet 1 allows you to work out your Foreign Tax Credit Relief (FTCR) position if you have overlap profits
• working sheet 2 will help you calculate the FTCR that must be recovered if you’re now claiming overlap relief

Working Sheet 1 — overlapping basis period and FTCR claims

You only need to complete this if your basis period for 2022 to 2023 overlaps with that for 20221 to 2022 and you’re claiming FTCR for 2022 to 2023. Fill in a separate working sheet for each business in which you have an overlap.

Boxes 1 and 2

Enter the start and finish dates of your basis period for 2022 to 2023 (from boxes 66 and 67 of your Self-employment (full) pages) and its length in months.

Boxes 3 to 17

Use these boxes to show the results of all accounts that cover the period in box 1. Where any period of account has had to be time-apportioned to determine the amount of taxable profits for 2022 to 2023 (because it does not wholly coincide with the basis period), enter only the information relating to that part of the period of account which forms part of the basis period. Where a complete period of account falls wholly within the basis period shown in box 1, enter the information asked for without apportionment.

Boxes 18 to 21

Enter the totals for each column. The number of months shown at box 18 must be the same as box 2.

Example 1

You commenced business on 1 January 2022 and you make up your accounts for the 6 months from 1 January 2022 to 30 June 2022 and for the 12 months from 1 July 2022 to 30 June 2023. Your basis periods are as follows:

• 2021 to 2022 — 1 January 2022 to 5 April 2022
• 2022 to 2023 — 1 January 2022 to 31 December 2022 and your overlap period is 1 January 2022 to 5 April 2022 (check example 2)

Enter the information, profits etc. shown in your accounts for the period 1 January 2022 to 30 June 2022 in boxes 3 to 7, and enter half of the profits etc. shown in your accounts for the period 1 July 2022 to 30 June 2023 in boxes 8 to 12 (that is, representing the profits etc. of the 6 months 1 July 2022 to 31 December 2022).

Box 22

Enter the start and finish dates of your basis period for 2021 to 2022.

Boxes 23 and 24

Enter the start and finish dates, and the length in months, of the period that is common to both your 2021 to 2022 and 2022 to 2023 basis periods (the ‘overlap’ period).

Boxes 25, 29 and 33

Enter the number of months of the overlap period as shown in box 24.

Boxes 26, 30 and 34

Enter the number of months of the same period or periods of account shown in boxes 3, 8 and 13 that include the overlap period.

Example 2

So, continuing example 1, if the overlap period is 1 January 2022 to 5 April 2022 (3 months), ‘6’ would need to be entered in each of these 3 boxes, because this is the length in months of the period of account into which the 3 month overlap period falls.

Box 27

Enter the amount of total taxable profits (from boxes 5, 10 and 15) of the period or periods of account that includes the overlap period.

Box 28

Multiply the figure in box 27 by the fraction (box 25 divided by box 26) and enter the result in box 28.

Box 31

Enter the amount of foreign source profits (from boxes 6, 11 and 16) included in the total taxable profits of the period or periods of account which include the overlap period.

Box 32

Multiply the figure in box 31 by the fraction formed by the figure in box 29, divided by the figure in box 30, and enter the result in box 32.

Box 35

Enter the amount of foreign tax paid (from boxes 7, 12 and 17) on the foreign source profits shown in box 31.

Box 36

Multiply the figure in box 35 by the fraction formed by the figure in box 33, divided by the figure in box 34, and enter the result here.

Box 39

Enter the amount of FTCR allowed in 2021 to 2022 on the foreign source overlap profits shown in box 32.

Copy the figure in box 20 to column F (in the line giving other details for the business) on page F 6 of the Self Assessment: Foreign (SA106) pages.

Copy the figure in box 40 to column C (in the same line) of the Self Assessment: Foreign (SA106) pages.

Working Sheet 2 — Overlap relief and FTCR

Fill in working sheet 2 using these instructions, if you’re claiming overlap relief as a deduction from business profits, and you received FTCR in earlier years against tax due on the overlap profits contributing to the amount deducted this year.

Box 1

Enter the figure of overlap profits brought forward from last year.

Box 2

Enter the amount of additional FTCR allowed in the years when the overlap profits arose (that is, when the basis periods overlapped) and which has not been recovered subsequently.

Box 3

Enter the figure of overlap relief deducted in arriving at your taxable profits for 2022 to 2023 (from box 69 of your Self Assessment: Self-employment (full) (SA103F) pages or box 13 of your Self Assessment: Partnership (full) (SA104F) pages.

Box 4

Enter the proportion of the figure in box 2 that relates to the amount of overlap relief claimed this year.

Box 5

Enter the foreign tax paid in the 2022 to 2023 basis period for income from the same source as the overlap profits.

Box 6

Enter the amount of FTCR that would be allowable in 2022 to 2023 for the amount of foreign tax shown in box 5, if it were to be assumed that no Overlap Relief was deductible from 2022 to 2023 profits.

For this purpose only, you will need to add back the figure of overlap relief deducted (at box 69 of your Self Assessment: Self-employment (full) (SA103F) pages or box 13 of your Self Assessment: Partnership (full) (SA104F) pages) to arrive at taxable profits before Overlap Relief. Then complete a Foreign Tax Credit Relief working sheet (FTCRWS) in Helpsheet 263 Calculating Foreign Tax Credit Relief on income to calculate the figure (from box TC124 in the FTCRWS) to be entered in box 6 in working sheet 2.

Boxes 7 to 9

If the amount at box 6 is greater than that at box 4, enter the difference in box 7 and copy the entry to column C on page F 6 of your Self Assessment: Foreign (SA106) pages, then complete the rest of the page as indicated. If the amount in box 4 exceeds that in box 6, enter the amount of the excess in boxes 8 and 9. No FTCR is due this year for income from the same source as the overlap profits. Instead, the excess of box 4 over box 6 will be recovered by way of a tax charge. If you’re calculating your tax, copy the figure in box 9 to box 14 in your tax calculation summary pages.

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