Commentary

B2.112 Cash basis for small unincorporated businesses

Business tax
Business tax | Commentary

B2.112 Cash basis for small unincorporated businesses

Business tax | Commentary

Trading profits and small businesses

B2.112 Cash basis for small unincorporated businesses

From 2013/14 a person who is or has been carrying on a trade may elect for the profits to be calculated using the cash basis of accounting, rather than in accordance with generally accepted accounting practice, provided certain criteria are satisfied1. The cash basis applies to professions and vocations as it does to trades, but is not available to companies2. A person may make the election for a tax year if conditions A to C below are met3:

  1.  

    (A)     the aggregate of the cash basis receipts of each trade, profession or vocation that he carries on during that year do not exceed any relevant maximum for that year

  2.  

    (B)     where the person is an individual who controls a firm (meaning a partnership), or a firm controlled by an individual, the aggregate of the cash basis receipts of each trade, profession or vocation carried on by the individual or the firm during that year do not exceed any relevant maximum for that year, and the firm or individual (as the case may be) has also made an election for that year

  3.  

    (C)     the person is not an excluded person for the tax year

A person controls a partnership if he has the right to more than one half of the assets or income of the partnership. If two partners own a partnership equally there is no controlling partner. For non-controlling partners, whether they are in a partnership with a

To continue reading
View the latest version of this document, as well as thousands of others like it, sign in to TolleyLibrary or register for a free trial