Articles20 May 2024
Navigating Employee Travel Tax Relief: Key Guidance Updates 員工出差稅務減免指南更新
With recent updates to HMRC guidelines, it's crucial for businesses and employees to be well-informed to maximise potential tax benefits.
Articles
Cash basis reform: potential turnover threshold changes
With basis period reform now underway, HMRC is looking at further tax simplification for sole traders and partnerships by increasing the cash basis turnover threshold. The cash basis scheme removes complexities such as accruals and most capital allowances. The cash... Read more
With basis period reform now underway, HMRC is looking at further tax simplification for sole traders and partnerships by increasing the cash basis turnover threshold. The cash basis scheme removes complexities such as accruals and most capital allowances.
The cash basis can only be used currently if a business’s annual turnover does not exceed £150,000, although the business can then remain in the scheme until turnover reaches £300,000.
Income threshold
HMRC is considering two alternatives to expand the availability of the cash basis:
- The turnover limit could be set at £1.35 million, with businesses not required to leave until turnover reaches £1.6 million. These are the same limits that apply for the VAT cash accounting scheme.
- The turnover threshold could be removed so that any business, regardless of size, can join.
HMRC is also looking at making the cash basis the default method of calculating trading income for eligible businesses, so the scheme would become ‘opt out’, rather than the current ‘opt in’.
Other proposals
Two reasons why a business may currently choose not to use the cash basis are because of restrictions on relief for interest costs, and the use of losses. HMRC is looking at changes here, although nothing definite has been announced:
- Interest and bank charges are restricted to a maximum deduction of £500. This limit might be increased, possibly as high as £1,000. With the rise in interest rates, the £500 restriction means the cash basis is currently not beneficial for many businesses.
- If the cash basis is used, any losses can only be carried forward – they cannot be relieved against other income or carried back. A number of options are being considered, but it does look as if loss relief rules will be relaxed, just not to the extent that relief is available where normal accounting rules are used.
HMRC’s guide to the cash basis can be found here.
Key information +-
THE AUTHOR
Jane Thackstone
Partner
More & Other Musings
View all related contentArticles16 May 2024
R&D tax credits – advanced assurance, will it now be recommended practice?
This advanced assurance hasn’t been widely used historically, we explain why it may become standard practice
Articles27 Oct 2023
Important Changes to Corporation Tax and the Impact of Associated Companies
Significant changes to the UK's corporation tax rates came into effect from 1 April 2023, and it's essential for businesses to understand the implications, especially if they are associated with other companies.
Articles26 Oct 2023
Transfer Pricing: the reasons why your business needs to take it seriously.
Transfer pricing is a critical aspect of international taxation that often gets overlooked by businesses. However, understanding and managing transfer pricing is becoming increasingly vital, especially in a globalised economy where multinational corporations operate across various countries. Understanding Transfer Pricing... Read more
Articles26 Jul 2023
Simplification of the UK Tax System, is it a good idea?
Simplifying the UK tax code has been a topic of debate among politicians, economists, and tax professionals. Advocates argue that it can lead to better administrative efficiency, higher compliance rates, and economic growth. On the other hand, detractors raise concerns... Read more