ACCA Taxation (F6) Practice Exam

In the year of cessation, what profits are a taxpayer assessed on?

1. Only the profits from the last quarter

2. Any remaining profits

3. Projected profits for the next year

4. Monthly averages of the past year

The correct answer is: Any remaining profits

In the year of cessation, a taxpayer is assessed on any remaining profits from the trading period leading up to the cessation of trade. This includes all profits that have not yet been taxed and that were earned from the start of the trading period until the moment trade ceases. Assessing on any remaining profits ensures that all income generated by the business during its operational period is taken into account, providing a complete picture for tax purposes. This prevents any potential loss of tax revenue from the profits that were earned before the business ceased operations. The other options do not reflect the actual practices of taxable assessments for businesses that have ceased trading. Assessing only profits from the last quarter would ignore any earlier profits accrued in the year. Projecting profits for the next year is not applicable, as taxation is based on actual earned income, not forecasts. Similarly, using monthly averages of the past year would not accurately capture the total profits earned up to cessation. Overall, the approach of assessing any remaining profits provides a fair and comprehensive method for taxation in the year of cessation.