Advent Admin and Account : What is new

What is new


From April 2013, the Government proposes to introduce a voluntary cash

basis for small businesses along with simplified arrangements for some

business expenses.

Who will be able to use the cash basis?

• Most self-employed people, particularly those whose earnings come

from their own work

• The Government would like to explore a threshold so that small

businesses with receipts of less than £77,000 would be eligible, and

they could continue to use it until their receipts rise to more than

£150,000 in any year.

Who won’t be able to use the cash basis?

• Small businesses with receipts of more than £150,000 in any year

• Property businesses

• Companies and some other specific businesses.

Who will be able to use simplified expenses?

• Any business using the cash basis must do so

• Any other business (apart from Companies and Limited Liability


Who won’t be able to use simplified expenses? 

• Companies.

How will the cash basis differ from the normal tax rules?

• No need to understand rules designed for larger businesses

• No need to pay tax until cash is received

• No need to keep complicated records (for example, stock, debtors and

creditors), over and above those needed to run a business effectively

• No need to understand capital allowances

• No need to keep detailed records for certain key expenses – use a

standard rate instead.

I qualify for the cash basis but will I have to use it?

The new, simpler scheme should be suitable for most small businesses,

although some may still wish to use the normal rules. It will be entirely

voluntary and any business using the new scheme will be free to go back to

the normal rules. Businesses can choose the scheme that works best for

them. What will I need to do to use the cash basis?

• Record all money received in connection with your business and

amounts paid to cover allowable expenses

• Record any business miles driven by car or motorcycle and be in a

position to assess roughly how much time, if any, you spend working at

home for your business

• Select cash basis on your Tax Return form.

How will I calculate my taxable income?

The new cash basis will operate by reference to the tax year (6 April to 5

April). This means small businesses will be able to calculate their taxable

income for the tax year by adding or subtracting:

• Receipts in connection with the business received in the tax year

• Payments made in the tax year to cover allowable expenses

• Amounts allowed for simplified expenses.

What expenses will be allowable?

• Those incurred for the purpose of the business, such as anything

bought to be sold on

• Some bought assets, such as plant or machinery and vans

• Interest on purchases, provided the purchase itself is an allowable

expense. So, trade credit charged by suppliers of goods or services,

the interest charges for hire purchase or leasing of plant or machinery,

and credit card interest on allowable purchases are permitted. 

What expenses won’t be allowable?

• Other bought assets such as investments in land, property and shares

• Costs allowed via simplified expenses 

• Interest on cash borrowings, such as a bank loan

• The withdrawal of cash for personal use

• Payment of income tax or capital gains tax.

I’m an existing business, so how will I switch to the cash basis?

To do so may require adjustments to taxable income. 

HMRC will be providing guidance to help small businesses make the switch