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HMRC internal manual

Business Income Manual

HM Revenue & Customs
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Cash basis: expenses: overview

The total amount of expenses of the trade to be brought into account in calculating profits under the cash basis are those paid during the basis period for the tax year, subject to any adjustment required or authorised by law. So a business using the cash basis will not need to account for bad and doubtful debts, for example.

Any payments made for both a business and a private purpose should be apportioned, and only the business proportion should be included as an allowable expense. For certain expenses, the allowable business proportion can be calculated using simple flat rates, See BIM75000 onwards for more information.

Calculating profits or losses of a trade using the cash basis does not usually affect the types of expenses which are allowable, with the exception of the specific rules on

Any expenses paid after the cessation of a trade using the cash basis are treated as post-cessation expenses (see BIM90080).