Test your understanding: answers
(1). Harry's terminal loss
| £ | £ |
|---|---|---|
2025/26 (6 April 2025 –31 December 2025) |
|
|
|
|
|
9/10 x £14,000 loss |
| 12,600 |
|
|
|
2024/25 (1 January 2025 – 5 April 2025) |
|
|
1 January 2025 – 28 February 2025 |
|
|
(2/12 x £10,800 profit) | (1,800) |
|
1 March 2025 – 5 April 2025 |
|
|
(1/10 x £14,000 loss) | 1,400 |
|
Net profit, so nil loss |
| ― |
|
| 12,600 |
(2). Statement A is false.
The loss can be offset against the trader’s taxable trading profits of the tax year of cessation and the three tax 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.
