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HMRC internal manual

Business Income Manual

Cash basis: receipts: overview

S31A - 31D ITTOIA 2005, S148K ITTOIA 2005

A person may elect for their profits or losses to be calculated on the cash basis instead of in accordance with generally accepted accounting practice for a tax year if they meet all the conditions below:

  1. The total cash basis receipts for all trades carried on by the person in a tax year do not exceed the relevant maximum amount.
  2. Where the person is either an individual who controls a partnership or a partnership controlled by an individual, the total cash basis receipts for all trades carried on by the individual or partnership in a tax year do not exceed the relevant maximum amount and the individual or partnership uses the cash basis for all those trades. For more information on the eligibility rules for partners and partnerships, see BIM70011.
  3. They are not excluded from using the cash basis.

If a person elects to use the cash basis for a tax year, they must use the cash basis for each trade they carry on during that tax year.

The relevant maximum amount for the 2017-18 tax year onwards is £150,000, or £300,000 for Universal Credit claimants. For the latest information, see

In previous tax years the relevant maximum amount was set at the VAT registration threshold at the end of that tax year, or twice the VAT registration threshold for Universal Credit claimants. At the end of the tax year 2016-17, the threshold was £85,000. For previous VAT registration threshold, see (Web) 

Where the basis period for a tax year is less than 12 months, the relevant maximum amount is proportionately reduced, but it is not similarly increased for long basis periods.

Cash basis receipts are those received during the basis period for the tax year and which would be brought into account in calculating the profits of the trade for that tax year on the cash basis. Guidance on cash basis receipts is at BIM70015.


The cash basis is available for unincorporated businesses only, companies and limited liability partnerships cannot use it.

In addition, the following are excluded from using the cash basis:

  • Partnerships with one or more corporate partners
  • Lloyd’s underwriters
  • Businesses with a current herd basis election
  • Persons with a S221 ITTOIA 2005 profit averaging election
  • Businesses that have claimed business premises renovation allowance at any time within the seven years ending immediately before the basis period for the tax year
  • Businesses that carry on a mineral extraction trade
  • Businesses that have claimed research and development allowance.

For businesses using the cash basis, certain rules concerning the tax treatment of specific trades, professions or vocations are disapplied. These rules are found in ITTOIA 2005:

  • Dealers in securities, S149 - 154A
  • Relief for mineral royalties, S157
  • Lease premiums, S158
  • Ministers of religion, S159
  • Mineral exploration and access, S161
  • Payments by persons liable to pool betting duty, S162
  • Intermediaries treated as making employment payments, S163 - 164
  • Managed service companies, S164A
  • Waste disposal, S165 - 168

Cemeteries and crematoria, S169 - 172ZE