Property income ― accruals basis

By Tolley
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The following Personal Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Property income ― accruals basis
  • When is the accruals basis used to calculate property business profits?
  • Calculation of profits under the accruals basis
  • Income tax / corporation tax differences

When is the accruals basis used to calculate property business profits?

Prior to the 2017/18 tax year, profits and losses were calculated on the accruals basis, unless the gross rental profits did not exceed £15,000, in which case a non-statutory cash basis could be used. If used, the cash basis needed to be used consistently, and the overall result needed to be reasonable and not differ substantially from the amount produced using the accruals basis.

PIM1101

From the 2017/18 tax year onwards, the simplified cash basis is the default method of calculating property income from property businesses. See the Simplified cash basis for unincorporated property businesses guidance note.

The simplified cash basis must be used unless any of the following conditions apply:

ConditionComment
The property business is carried on by a company, a limited liability partnership (LLP), a partnership with a corporate partner or a trustTherefore, the simplified cash basis applies to property businesses run by individuals and those run by partnerships (that are not LLPs) where all the partners are individuals. Note that there is no territorial scope to these provisions; they apply equally to UK property businesses run by non-resident individuals where the income is taxable in the UK

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