Cash basis

Cash basis

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How does the cash basis work in relation to self employed persons who have in the past completed income and expenditure statements rather than a full set of accounts. Can somebody who has in the past complete an I&E statement continue to d so or are they automatically switched in to the cash basis.

I am particularly thinking in relation to losses and finance costs because for income and expenditure statements it was possible to claim sideways loss relief and more than £500 in finance costs.

I have just been asked to act for somebody who has completed an income and expenditure statement for a number of years and it's been awhile since I last completed accounts without a balance sheet and accruals and prepayments. So advice on this would be appreciated.

Thanks

Replies (3)

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By johngroganjga
15th Apr 2015 12:40

No one is required to use the cash basis. Income and expenditure statements include accruals and prepayments,

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By JamesAnd
15th Apr 2015 12:49

Thanks John

In this clients case he has little to accrue or prepay apart from possibly a small amount of car insurance/tax and perhaps accountancy fees. The previous accountant has not included any adjustments or a balance sheet 

He is a driving instructor so incurs more than £500 in car leasing/interest costs.

So further to your response presume I can claim full finance costs and simply say no prepayments or accruals (or at least none included as would be very minimal)?

And obviously don't tick the box on the return to say cash basis used.

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By johngroganjga
15th Apr 2015 14:20

Well if you don't want to use the cash basis just continue with the accruals basis, but do it properly.

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