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

Test your understanding: answers

(1). The length of a trader’s overlap period is equal to the number of months from the accounting date to the end of the tax year. Accordingly, the change of accounting date will increase Nathan’s overlap period from five months (1 November to 5 April) to nine months (1 July to 5 April).

(2). Harry’s terminal loss

 £
£

2019/20 
(6 April 2019 – 31 Dec 2019)

  
9/10 x £14,000 loss 

12,600

Overlap profits

 

1,300

  

13,900

   

2018/19
(1 January 2019 – 5 April 2019)

  

1 January 2019 –
28 February 2019

  

(2/12 x £10,800 profit)

(1,800)

 

1 March 2019 – 5 April 2019

  

(1/10 x £14,000 loss)

1,400

 

Net profit, so nil loss

 

           ―

  

13,900


(3). Statement A is false.
The loss can be offset against the trader’s taxable trading profits of the year of cessation and the three years prior to that year on a last in, first out basis.

Statement B is false.
There is no requirement to account for output tax in respect of assets held on cessation where the VAT due does not exceed £1,000.