How to use HFS+ encrypted partition as Time Machine backup drive
This unbelievable problem has simple solution. Just leave the checkbox ticked and the encrypted partition will be used as is. No double encryption.

If you check the help ? there is written that the disk does not support encryption if the checkbox (Encrypt backups) is dimmed. Hence implying Time Machine is using disk encryption not another one on top of that. 



So the checkbox is just for people who had not prepared the disk yet.