When the cash basis scheme may not be suitable

Source: HM Revenue & Customs | | 23/06/2020

The cash basis scheme helps many sole traders and other unincorporated businesses who benefit from a simpler way of managing their financial affairs. The scheme is not open to limited companies and limited liability partnerships. The scheme allows qualifying businesses to use the cash basis when recording income and expenditure. However, some small businesses are more suited to using the cash basis than others.

If a business falls within any of the following categories, the cash basis may not be the best option:

  • want to claim interest or bank charges of more than £500 as an expense
  • run a business that is more complex, e.g. have high levels of stock
  • need to obtain finance for the business - a bank could ask to see accounts drawn up using traditional accounting to see what the business owes and is due before agreeing a loan
  • have losses that the owner wants to offset against other taxable income (sideways loss relief)

In a nutshell, the scheme is most suitable for straight forward businesses especially those that provide services. Businesses must have a turnover of £150,000 or less to join the scheme and can continue using the scheme until the business turnover reaches £300,000.



 

Latest News

Updated HM Treasury instructions re: CJRS
30/06/2020 - More...
On 26 June 2020, the Chancellor, Rishi Sunak made a further (third) Treasury Direction under sections 71 and 76 of the Coronavirus Act 2020 concerning the Coronavirus Job Retention

Government support for pubs, cafes and restaurants
30/06/2020 - More...
The government has confirmed a further easing of lockdown as pubs, cafes, restaurants, hotels, hairdressers and cinemas have been given permission to reopen in England from 4 July.

Financial help for debt advisers
30/06/2020 - More...
The government has announced that an extra £37.8 million will be made available to support debt advice providers during 2020-21. The distribution of the money will be

Search


Newsletter

With our newsletter, you automatically receive our latest news by e-mail and get access to the archive including advanced search options!

» Sign up for the Newsletter
» Login