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Published on 16 January 2024

Finance bill briefing: Clause 16 and Schedule 10: Provision relating to the cash basis

a calculator, a magnifying glass and a pad of squared paper with the words 'Cash basis' written on the top sheet along with an illustration of a stack of money

We are generally supportive of these changes as making the cash basis the default way to prepare business accounts will formalise the way some low-income unrepresented traders are currently, and technically incorrectly, completing their tax returns.

However, we have a number of concerns about the expansion of the cash basis. These are:

  • the timing of the new rules starting from April 2024 as this is also the first year of the new Basis Period Reform rules (following the 2023/24 transition year);
  • there needs to be improved guidance clarifying areas which low-income unrepresented businesses struggle with, such as the timing of receipts and payments under the cash basis, in particular when trading through digital platforms;
  • HMRC need to develop a compliance approach for taxpayers who realise they have been preparing their tax returns incorrectly using the cash basis but not electing to do so. We recommend that HMRC apply a sensible and ‘light-touch’ approach regarding any genuine errors which come to light following the move to these new rules.

Claire Thackaberry

Technical officer

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You can read LITRG’s full briefing using the link provided. 

LITRG's briefing
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