This HM Revenue & Customs (HMRC) consultation seeks views and feedback on proposals to increase eligibility and use of the income tax cash basis for the self-employed. These proposals aim to increase the number of businesses able to benefit from the simplifications the regime offers, making the rules easier to apply and understand, and to help businesses spend less time filing their tax returns.
What is income tax cash basis?
The cash basis is a simplified regime for calculating taxable profits for businesses with straightforward tax affairs. The regime allows businesses to calculate their taxable profit as the difference between income and expenditure when money is actually received or paid out. This eliminates accounting and tax complexities such as accruals and most capital allowances and simplifies reporting.
There are four policy proposals
The consultation will focus on the four following policy proposals, but welcomes other ideas:
- increasing the turnover thresholds for businesses to use the cash basis;
- setting the cash basis as the default, with an opt-out for accruals;
- increasing the £500 limit on interest deductions in the cash basis; and
- relaxing restrictions on using relief for losses made in the cash basis.
Who should respond to this consultation?
HMRC would like to hear from businesses, particularly self-employed businesses that use or would be eligible for the cash basis, their advisers, representative bodies, software providers, and other interested parties.
HM Revenue and Customs (HMRC) has been reminding taxpayers that there are now fewer than 100 days left to file their tax return and pay any tax due for the 2024-25 tax year.
As part of its move to reduce ‘red tape’ and aid business growth, the government has announced plans to remove the requirement for companies to include a directors’ report as part of their annual accounts.