Cash basis expenditure

Produced by a Tolley Owner-Managed Businesses expert

Owner-Managed Businesses

Guidance

The cash basis provides a simpler way for smaller businesses to calculate their taxable profits, which is based on receipts less payments subject to any adjustments required for tax rules. This guidance note details the calculation of profit, for details on the eligibility of a business to use the cash basis, see the Cash basis ― overview guidance note and for a summary of the consequences of joining or leaving the cash basis, see the Cash basis ― joining and leaving guidance note.

From 2024/25, the cash basis for trading businesses will be expanded to remove the turnover limits, the interest restriction and the limitations on the utilisation of losses. See the Cash basis ― overview guidance note.

General calculation of profit

Under the cash basis, there is a simple two-step calculation:

•
cash receipts actually received, less
•
cash expenses actually paid

ITTOIA 2005, s 31E

In addition to this, the removal of the requirement for generally accepted accounting practice (GAAP) treatment provides a simplification of the accounting treatment. Consequently, it is not possible to receive

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