Test your understanding
(1). Harry ceased trading on 31 December 2026. His results in the final periods of trading were:
- Year ended 28 February 2026: £10,800 profit
- Ten months ended 31 December 2026: £14,000 loss
Harry has no transition profits as a result of the change to the basis of assessment.
Calculate Harry’s terminal loss.
(2). State whether the following statements are true or false in respect of the cessation of a business on 31 August 2026.
A Any terminal loss can be offset against the trader’s total income of the tax year of cessation and the three tax 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 tax in respect of assets held on cessation where the value of such assets does not exceed £1,000.
