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29 November 2006
Correspondence from readers on topical subjects.
Cash Accounting for Small Enterprises (CASE)
This should be firmly resisted both by practitioners and HMRC.
Cash accounting in any accounts preparation exercise is unsatisfactory for a number of reasons:
- it does not normally result in the true profit for the year which can mislead the client;
- it produces inconsistent tax liabilities leading to difficulties with clients (and HMRC);
- it positively encourages poor record keeping by clients: in particular there will be a temptation to stop keeping records of work done;
- it lowers the quality of our work reduces assurance and sharply increases the prospect of error and client dissatisfaction and is to put it bluntly unprofessional;
- it will result in yet further loss of tax to HMRC.
For many years the Revenue in practice accepted 'income and expenditure...
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