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Transitional Overlap Profit arises in y/e 5/4/98 for businesses that commenced trading prior to 6/4/94. It provides compensation for the fact that the transition from old rules to new rules means that the business will be taxed on more days trading than actually exist in the life of the business.
The amount is computed on the profits before capital allowances
The number of overlap days is the gap between the end of the basis period in y/e 5/4/97 and 5/4/97. It follows, therefore, that most businesses will have some transitional overlap profit, even those with a 31/3 period end will have 5 days. It is only business with a transitional basis period ending on 5/4/97 that will not receive transitional overlap relief
For example, a trade with a period end of 31/12/97 (previous period end 31/12/96) with a profit of 20,000 before capital allowances will have overlap profit stored of 95 days, 5,205.
In order to compute the amount, IRIS needs just one accounting period; the first one to end after 5/4/97.