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bigduckontax, Accountant
Category: Tax
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I am a sole trader (Est. 1989) and my year end is 30th June.

Customer Question

I am a sole trader (Est. 1989) and my year end is 30th June. I have just completed my tax return -14, based on my accounting period ending June 2013. My wife is employed by the business.
I keep my accounts in good shape but because of the time between filing the assessment and year end, this has caused problems in the past. It also becomes a bit of a problem when submitting our claim tax credits as my income is always a year behind my wife's income.
I am considering changing my year end to 31st March to simplify things. I have 15 employees on PAYE and they are all paid at the end of the Month so there would be little point in extending it to 5th April as my PAYE is always completed by 31st March each year.
In order to do this, i would need to extend by my accounting period by 9 months. Would I use the overlap relief facility to enable me to do this or how would I go about it? I have not changed my accounting period last 15 years or so. (it used to be 16th July)
Any advice you could give would be appreciated.
Alan Fuller
Spectrum Cleaning Services
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Alan, I'm Keith and happy to help you with your question.
From the tenor of you question I gather that you already have some overlap available from the past. Tax Café has the following guidance on overlap relief
'There are two ways to gain access to your overlap relief: cease trading or change your accounting date.
Ceasing to trade is a drastic step: generally not something you are likely to do purely planning purposes. However, it is worth noting that transferring your business to a company is also classed as ‘ceasing to trade’ purposes.
Changing your accounting date to access your overlap relief is less drastic, but the downside is that the relief only arises where you are being taxed on more than twelve months’ worth of profit. Despite this, however, there is still generally an overall saving to be made where current profits are at a lower level than the profits arising when the ‘overlap’ first arose. So, with the economy in the state it’s in, now could be a good time to ‘cash in’!'
Clearly you are not ceasing trading, so if you do have some overlap relief you can utilize it by changing your accounting date. If you have none available to you your change of accounting date will create an element of overlap relief.
I do hope I have given you food with your business and its profits.