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HMRC internal manual

Business Income Manual

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HM Revenue & Customs
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Cash basis: alternative basis: barristers

S160 ITTOIA 2005; Para 57, Schedule 4 FA 2013

Historical overview

For many years the Revenue had a practice under which businesses which count as ‘professions’ or ‘vocations’ could, subject to certain conditions, compute their profits for tax purposes on a ‘cash’ or ‘conventional’ basis, rather than the ‘earnings’ or ‘accruals’ basis which traders and companies had to adopt. This was the ‘old cash basis’. Many professional businesses, including some of the largest firms of accountants and solicitors, used this practice.

Barristers: alternative basis

Legislation was introduced in 1998 to ensure that professions used the accruals basis. The legislation allowed the use of an alternative basis for independent barristers in the early years of their practice.

Section 160 ITTOIA allowed barristers to be taxed on a cash basis or by reference to fees earned where the amount has been agreed or in respect of which a fee note has been delivered. If the barrister calculates profits in accordance with generally accepted accounting practice (GAAP) the barrister cannot take advantage of the section 160 alternative in later years.

The legislation allowed this treatment for both barristers and advocates.

S160 ITTOIA was repealed by Finance Act 2013.

Barristers: cessation of alternative basis

Barristers who used the alternative basis for the tax year 2012-13 will be able to continue to do so until the period of account ending not more than seven years after the start of practice as a barrister. For the tax year 2013-14 barristers starting independent practice will not be able to use the alternative basis of calculating profits.

However, all barristers will be able to use the new cash basis if they meet the cash basis thresholds and requirements (see BIM70010).

The new treatment applies equally to advocates.