Simplified cash basis for property businesses

By Tolley
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The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Simplified cash basis for property businesses
  • Criteria for cash basis for property businesses
  • Calculation rules
  • Treatment of losses
  • Transitional adjustments
  • Planning considerations

From 2013/14 a simplified cash basis of calculation of trading profits has been available to small businesses ― see the Simplified cash basis for small businesses guidance note. From 2017/18 a very similar simplified cash basis is also available to small unincorporated property businesses.

Although the simplified cash basis for property businesses is a new basis of calculating profit, many of the established principles continue to apply. This is because selected pieces of legislation continue to apply and new legislation mirrors established legislation. Where the wording of legislation is such that it matches existing legislation, it should be considered that Parliament has intended that current interpretations are acceptable.

The simplified cash basis for property businesses operates in the same way as the small business regime in that income is calculated simply as cash receipts less cash expenses of the business. Consequently, it is not possible to receive deductions for accruals or provisions.

Criteria for cash basis for property businesses

Unlike the cash basis for small businesses, the cash basis for unincorporated property businesses is the default method of calculating the property income, unless:

  • the landlord makes an election not to use the simplified cash basis (separate elections must be made for different types of property businesses)

More on Taxation of property income: