Final tweaks simplify cash basis law

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John Stokdyk
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A few minor tweaks have been made to simplify the optional cash accounting regime that will be available to small, unincorporated businesses from 1 April.

An updated TIIN released on Budget day explained that HMRC has taken note of feedback during user testing and introduced tighter wording to block flipping in and out of the regime. Critics of the scheme warned that some businesses might attempt to avoid tax by opting in and out of cash accounting. The revised legislation will now specify that businesses using the cash basis have to continue doing so until their circumstances change.

“You will only be able to change for genuine commercial reasons,” explained Rebecca Benneyworth.

The simplified flat rate vehicle expenses schedule will also no longer be mandatory for those using the cash basis. A few other changes have been made to simplify the legislation wording, including a provision for “just and reasonable” adjustments where an individual takes business goods for their own use. Users of the cash basis will also not be forced to align their accounting periods with the tax year.

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21st Mar 2013 15:02


All looks straightforward to me. Those opting to use the cash basis will not have to use the simplified flat rate expenses for their cars under "Simpler income tax for the simplest small businesses". A simple capital allowance computation will be required thereby making it not quite a cash basis - but nearly. You couldn't make this up, could you? In any case 10 days is plenty enough time for me to digest all of this and advise my clients of the changes.

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22nd Mar 2013 11:23

Universal Credits

I went on a tax course last week and was told that any self- employed person who claimed Universal Credits would have to go on the simplified cash scheme. Is this still the case?

If so, what about a partnership whereby only 1 partner needs to claim Universal Credits - is the partnership business forced to use simplified cash accounting?

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22nd Mar 2013 16:51

Universal Credits

I might be wrong Elaine but I think the cash basis for UC claimants is not the same as the cash basis for income tax. I believe it's just an "easy" way (I've avoided the word "simple") to report your earnings each month in a very timely fashion in order not to breach the stringent deadlines. There will clearly be some correlation between 12 of these claims and the annual taxable profits but there will be differences if only because vehicle capital allowances are now counted as allowable cash expenses. So, to answer your question, UC claimants don't have to opt for "simplified cash accounting". If I've got this wrong somebody please tell me because I'm losing the will to live.

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