Cash basis
Who can use cash basis
You can use cash basis if you鈥檙e a sole trader or partnership without corporate partners.
If you have more than one business, you can choose whether you use cash basis or traditional accounting for each business.
Who cannot use cash basis
You cannot use cash basis if your business is a:
- limited company
- limited liability partnership
- partnership with one or more corporate partners
You also cannot use cash basis if you鈥檙e a:
- Lloyd鈥檚 underwriter
- farming business with a current herd basis election
- farming or creative business with a fluctuating profit averaging claim
- business that has claimed business premises renovation allowance within the previous 7 years
- business that carries on a mineral extraction trade
- business that has ever claimed research and development allowance
When cash basis might not suit your business
Some businesses may choose to use traditional accounting instead because it means they can use different rules to calculate their profits. These rules apply if the business:
- deals in securities
- claims relief for mineral royalties
- leases premiums
- is a minister of religion
- pays pool betting duty
- is an intermediary treated as making employment payments
- is a managed service company
- makes waste disposals
- is a cemetery or crematoria
If you use cash basis you鈥檒l not be able to use these rules.
If you cannot use cash basis
If you cannot use cash basis, you鈥檒l need to use traditional accounting to work out your taxable profits.
When you send your Self Assessment tax return you鈥檒l need to say that you鈥檝e used traditional accounting.
Talk to a tax professional (such as an accountant) or legal adviser if you need help.