Income Tax (Trading and Other Income) Act 2005 section 52-54

Overlap profit: pre-April 1994 trades, professions and vocations

Sections 52–54 deal with how overlap profit is calculated for trades, professions and vocations that were already running before the self-assessment regime began, specifically those set up before 6 April 1994 and carried on through the transitional period into 1997-98 and beyond.

• For trades started before 6 April 1994 and continuing after 5 April 1997, overlap profit includes 1997-98 basis period profits that fell after the end of the 1996-97 basis period but before 6 April 1997, calculated without adjustments for capital allowances or balancing charges (unless the firm included both an individual and a company)
• For overseas income from pre-April 1994 trades chargeable under the old Case IV or V rules for 1997-98, overlap profit includes profits arising before 6 April 1997, but where income was taxed on a remittance basis the rule only applies if the first UK receipt was before 6 April 1994
• The basis period for 1996-97 is determined using the original transitional rules in Schedule 20 to the Finance Act 1994, even though those rules have since been repealed
• All of these provisions remain subject to the anti-avoidance rules in Schedule 22 to the Finance Act 1995, which prevent exploitation of the transitional self-assessment rules, and the repeal of certain transitional provisions does not disturb double taxation relief assumptions

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