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BIM72010 | Cash basis: eligibility

From HM Revenue & Customs · Business Income Manual

A person must calculate profits or losses on the cash basis unless the following conditions apply:

  1. They have elected to calculate profits or losses in accordance with generally accepted accounting principles for that tax year.

  2. They are excluded from using the cash basis.

Exclusions

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 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