HMRC consults on simplified tax accounts

HMRC has published a consultation document on proposals for introducing a voluntary simplified cash basis for income tax and simplified arrangements for certain expenses, as announced in last week’s Budget.

The proposals put forward are far-reaching for the profession and we’ll follow up tomorrow with a detailed analysis.

As previewed in the Budget, the new HMRC document puts more flesh on the bones of the following proposals:

• Voluntary simplified cash basis - Government would like to explore a higher threshold so that small businesses with receipts of less than £77,000 would be eligible
• Businesses could continue within the cash basis until the receipts for the tax year exceed £150,000, in which case the normal tax rules would apply from the beginning of the following year
• General partnerships could use the cash basis, while individuals who undertake more than one unincorporated trading or professional business, would only be eligible for the cash basis if all those businesses are also eligible for, and use, the cash basis. An exception would be where an individual is a partner in a partnership that they do not control that uses the ordinary rules
• The cash basis would be available to foreign resident individuals, to the extent that they carry on a trade, profession or vocation in the UK
• Simplified expenses – the following expenses should be an integral part of the cash basis: Standard mileage rate for business use of cars or motorcycles; flat rate expenses for business use of home; and flat rate adjustment for personal use of business premises
• Those using the cash basis could choose to use the standard mileage rate for other motor vehicles, such as vans, rather than calculating actual expenses
• Identifying how it may be possible to align aspects of the cash basis for tax and self-employment income reporting for Universal Credit

The consultation period lasts until 22 June. Read the full article for Rebecca Benneyworth's full analysis.

Subject to the outcome of the consultation it is intended to publish draft legislation in autumn 2012, for introduction in the 2013 Finance Bill.

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