One topic which has been examined consistently in the Advanced Tax exam is CYB Closing year rules. These rules apply to a sole trader that pays income tax, Class 2 NIC and Class 4 NIC on the self-employed profits.
The first step is to look at the date of cessation and work out which tax year that falls into. This is the final tax year.
The second step is to compute capital allowances in the final accounting period. Due to the cessation, No AIA or WDA can be claimed. The balancing adjustment is computed as TAX WDV less Sale Proceeds. If a positive figure arises, this is called a balancing allowance and is deducted from trading profits. Alternatively, a negative figure is a balancing charge and must be added to profits.
The third step is to look at the penultimate or second last tax year and tax profits under the current year basis. This means we tax profits of the 12-month accounting period which ends in the current tax year.
The final step is to find the assessment for the final tax year. The easiest way to do this is to simply sweep up all the remaining profits to cessation into the final tax year. You then deduct overlap profits (given) from the final year’s assessment.
Tax is technical and I recommend you get a copy of Advanced Tax Condensed to help you. This uses accelerated learning techniques to quickly master the key information. They dramatically speed up your rate of learning and can be easily referenced when attempting exam questions.