Taxation of the unincorporated business for ATX (UK) - part 3: self-test

Test your understanding

(1). Nathan has always prepared accounts to 31 October. However, he has now decided to change his accounting date to 30 June.

What will be the effect of the change of accounting date on the length of Nathan’s overlap period?

(2). Harry ceased trading on 31 December 2020. He had unrelieved overlap profits of £1,300 as at 31 December 2020. His results in the final periods of trading were:

  • Year ended 28 February 2020 – £10,800 profit
  • 10 months ended 31 December 2020 – £14,000 loss

Calculate Harry’s terminal loss.

(3). State whether the following statements are true or false in respect of the cessation of a business on 31 August 2021.

A  Any terminal loss can be offset against the trader’s total income of the year of cessation and the three years prior to that year on a last in, first out basis.
B  The de minimis rule for output VAT on the cessation of a trade states that there is no requirement to account for output VAT in respect of assets held on cessation where the value of such assets does not exceed £1,000.