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Small enterprises such as hairdressers, window cleaners and cab drivers are being urged by HMRC to take advantage of the simpler system of recording income and expenses over the tax year.
Firms with an annual income of £79,000 or less can use the cash basis of accounting for money as it goes in and out of the business, rather than employing traditional method centred on accruals.
Small enterprises such as hairdressers, window cleaners and cab drivers are being urged by HMRC to take advantage of the simpler system of recording income and expenses over the tax year.
Firms with an annual income of £79,000 or less can use the cash basis of accounting for money as it goes in and out of the business, rather than employing traditional method centred on accruals.
The Revenue has also issued a reminder to unincorporated firms that they can opt for simplified expenses, using flat rates instead of calculating actual business expenses. The regime can be used for costs for vehicles, business use of home, and private use of a business premises as a home.
The ICAEW Tax Faculty’s technical manager, Anita Monteith, claimed the taxman was putting emphasis on the cash basis due to the lack of take-up since its launch in April 2013.
“Very few outside the tax profession know about it, and most of those within will not be using it for many clients because it is not appropriate,” she said, adding, “The only way HMRC will know how many people choose to use the cash basis is by how many tick the box on the 2014 tax return to say they have.
“This is likely to raise problems. For example, how many taxpayers will say they have used the cash basis because they have no idea about accruals but were, in effect, previously doing it that way?”
