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Cash basis v accruals basis for rental property

What are the disadvantages of using the cash basis?

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Could any readers provide a brief summary of some of the disadvantages of using the cash basis to calculate property rental income and expenditure?   

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By JDBENJAMIN
13th Nov 2019 15:47

Any proper accountant should already know the answer, so why does this question need to be asked here?

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By Tax Dragon
13th Nov 2019 16:18

Brave enough to criticise; not brave enough to answer?

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By ireallyshouldknowthisbut
13th Nov 2019 17:10

Is this your homework or something?

The main reason is I strongly object to dumbing down to the level when moronic 'cash accounting' is OK. This job can be pretty dull at times, I need to do SOMETHING to keep my awake other than spouting off on here.

Unless it saves the client tax. Then I might, and swap back to next year.

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Replying to ireallyshouldknowthisbut:
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By The Dullard
13th Nov 2019 17:30

Isn't the cash basis now mandatory for property businesses, unless one of the conditions (A-E) in ITTOIA 2005, s 271A is met, when GAAP is mandatory. I didn't think there was a choice?

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By Tax Dragon
13th Nov 2019 17:45

E.

Look at condition E.

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By The Dullard
13th Nov 2019 18:05

Oh, damn. I thought condition E was different for property businesses! And not doing any grunt work, I have no idea how the grunts are doing things!

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By ireallyshouldknowthisbut
13th Nov 2019 18:28

The grunts just tick a box on the tax return which says

"If you’ve used traditional accounting rather than cash basis to calculate your income and expenses, put ‘X’ in the box"

Annoyingly it doesn't say "Look Ma' I am a big boy and can do accruals accounting!"

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By Accountant A
13th Nov 2019 17:58

The main benefit is that it saves having to understand what accruals and prepayments are.

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By paul.benny
13th Nov 2019 19:27

Quote:

Could any readers provide a brief summary of some of the disadvantages of using the cash basis to calculate property rental income and expenditure?   

Yes, some readers could provide a brief summary.

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By Accountant A
13th Nov 2019 20:21

Quote:

Could any readers provide a brief summary of some of the disadvantages of using the cash basis to calculate property rental income and expenditure?   

I could provide a brief summary for £150 + VAT. I could provide a more detailed analysis for a higher fee. Please PM me for details.

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JCACE
By jcace
13th Nov 2019 22:42

Imagine you have a client who receives rent every six months in advance. on 1 April 2019 he/she receives such an amount, all of which will be taxed in 2018/19 under cash accounting, but hardly any of which will be taxed under accruals accounting.

If the client has a large creditor or accrual for an expense at the end of the year, no relief under cash accounting.

But it can be useful sometimes, particularly where there are significant rent arrears.

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