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Where a person enters the cash basis for businesses (see B2.111 and B2.112) for a tax year, adjustments are required for capital allowances purposes¹. This is because such businesses do not claim capital allowances (other than on cars), but are instead allowed a deduction from profits for certain capital expenditure².

In calculating the profits of the trade for the first cash basis period where the trader had been claiming capital allowances in the previous period for which there are unrelieved balances, a deduction is allowed for the amount of that expenditure that would be allowed under the cash basis³. Any remaining unrelieved expenditure on assets that are in any capital allowances pool at the end of the period before the trader starts using the cash basis (apart from that on non-cash deductible expenditure) becomes a deduction in the first year of the