Consultation outcome

Expanding the cash basis

• From: HM Revenue & Customs
• Published: 15 March 2023
• Last updated: 22 November 2023 — See all updates

This consultation has concluded

Download the full outcome

Expanding the cash basis - summary of responses

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Detail of outcome

We are grateful for the responses that we received on this consultation about expanding the cash basis.

Respondents agreed that the cash basis is a useful simplification for the smallest businesses and for those with simple affairs, and agreed with encouraging more of these businesses to use the cash basis where appropriate. Respondents provided feedback on the value of accruals accounting for many businesses, and on the interactions between the options proposed.

The government has considered all of the feedback received and will proceed with some of the changes as proposed in the consultation document, and go further than proposed on some of the changes. The government will:

• remove the turnover thresholds for businesses to use the cash basis
• set the cash basis as the default method of calculating taxable profits, with an opt-out for accruals
• remove the £500 limit on interest deductions in the cash basis, aligning the rules with accruals
• remove the restrictions on using relief for losses made in the cash basis, aligning the rules with accruals

Alongside changes to the cash basis rules, HMRC will prioritise a review of the guidance available for the cash basis as part of its Small Business Guidance Review.

You can also read the tax information and impact note.

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Original consultation

Summary

We welcome views on options for extending the Income Tax cash basis for self-employed businesses which would allow more businesses to use the simpler regime.

This consultation ran from
11am on 15 March 2023 to 11:45pm on 7 June 2023

Consultation description

This consultation welcomes views on options to extend the self-employed cash basis, which is a simplified way of calculating taxable profits for Income Tax purposes. The government wants to ensure as many businesses as possible are able to benefit from this simplification.

The consultation will focus on the four following policy proposals, but welcomes other ideas:

• increasing the turnover thresholds for businesses to use the cash basis
• setting the cash basis as the default, with an opt-out for accruals
• increasing the £500 limit on interest deductions in the cash basis
• relaxing restrictions on using relief for losses made in the cash basis

We would like to hear from businesses, particularly self-employed businesses that use or would be eligible for the cash basis, their advisers, representative bodies, software providers, and other interested parties.

Documents

Expanding the cash basis for the self-employed

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Published 15 March 2023
Last updated 22 November 2023 + show all updates

1. 22 November 2023

   Published outcome and summary of responses to the consultation.

2. 15 March 2023

   First published.