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Deloitte comments on today’s Finance Bill - new optional cash accounting regime

29 March 2013

Patricia Mock, Deloitte tax director, said: “The Finance Bill confirmed that the new optional cash accounting regime (rather than using the accruals basis, which taxes all sales made even if the cash has not been collected at the accounting date) for self-employed individuals and some partnerships with cash receipts of less than the VAT registration threshold - currently £79,000 - will be available from 6 April 2013. Businesses which begin using the regime while their receipts are less than £79,000 will normally continue using this method until receipts reach £158,000. This is intended to simplify the tax reporting regime for small businesses and is being introduced alongside an optional regime for all unincorporated businesses to use a flat rate deduction system for certain expenses, rather than actual expenses incurred.

“The draft legislation included in the Finance Bill shows some improvements to that originally drafted. In particular, it will not be possible to move in and out of the cash basis each year, which would have proved extremely complicated for taxpayers to operate what is supposed to be a simplification.

“However, for existing businesses moving from the accruals basis to the cash basis, it now add one-off complexities which may not be worthwhile.  

“New businesses considering using a cash basis from the start need to be aware of two particular restrictions of the cash regime. Losses cannot be set against general income and the deduction for loan interest within the business will be limited to £500. While it appears that either of these reasons would be a sufficient change in circumstances to allow taxpayers to elect out of the regime, the restrictions are important matters to be aware of.”


Notes to editors
About Deloitte
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.

Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see for a detailed description of the legal structure of DTTL and its member firms.

The information contained in this press release is correct at the time of going to press.

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Laura Parsons
Deloitte LLP
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