½Û×ÓÊÓƵ

Income tax and GAAP

Prior to the tax year 2024/25, the profits of a trade for income tax purposes had to be calculated in accordance with generally accepted accounting practice, GAAP, unless a person was eligible for and elected to calculate profits on the cash basis for income tax purposes (see B2.112). There are exceptions for Lloyd's underwriters (see Division E5.6)¹. For the tax year 2024/25 onwards profits for an unincorporated business must be calculated under the cash basis unless it is an excluded trade or an election to use GAAP is made (see B2.111)².

'Generally accepted accounting practice' for this purpose means UK generally accepted accounting practice³. 'UK generally accepted accounting practice' (UK GAAP) means generally accepted accounting practice in relation to accounts of UK companies (other than accounts prepared under international accounting standards) that are intended to give a true and fair view. It has the same meaning in relation to individuals, entities which are not companies, non-UK companies and UK companies. UK GAAP generally requires account to be taken