{"id":24645,"date":"2023-04-11T11:08:23","date_gmt":"2023-04-11T11:08:23","guid":{"rendered":"https:\/\/smh.group\/?p=24645"},"modified":"2023-04-11T11:08:23","modified_gmt":"2023-04-11T11:08:23","slug":"cash-basis-reform-potential-turnover-threshold-changes","status":"publish","type":"post","link":"https:\/\/devstagesite.co.uk\/smhgroup\/cash-basis-reform-potential-turnover-threshold-changes\/","title":{"rendered":"Cash basis reform: potential turnover threshold changes"},"content":{"rendered":"<p><strong>With basis period reform now underway, HMRC is looking at further tax simplification for sole traders and partnerships by increasing the cash basis turnover threshold. The cash basis scheme removes complexities such as accruals and most capital allowances.<\/strong><\/p>\n<p>The cash basis can only be used currently if a business\u2019s annual turnover does not exceed \u00a3150,000, although the business can then remain in the scheme until turnover reaches \u00a3300,000.<\/p>\n<h2><strong>Income threshold<\/strong><\/h2>\n<p>HMRC is considering two alternatives to expand the availability of the cash basis:<\/p>\n<ul>\n<li>The turnover limit could be set at \u00a31.35 million, with businesses not required to leave until turnover reaches \u00a31.6 million. These are the same limits that apply for the VAT cash accounting scheme.<\/li>\n<li>The turnover threshold could be removed so that any business, regardless of size, can join.<\/li>\n<\/ul>\n<p>HMRC is also looking at making the cash basis the default method of calculating trading income for eligible businesses, so the scheme would become \u2018opt out\u2019, rather than the current \u2018opt in\u2019.<\/p>\n<h2><strong>Other proposals<\/strong><\/h2>\n<p>Two reasons why a business may currently choose not to use the cash basis are because of restrictions on relief for interest costs, and the use of losses. HMRC is looking at changes here, although nothing definite has been announced:<\/p>\n<ul>\n<li>Interest and bank charges are restricted to a maximum deduction of \u00a3500. This limit might be increased, possibly as high as \u00a31,000. With the rise in interest rates, the \u00a3500 restriction means the cash basis is currently not beneficial for many businesses.<\/li>\n<li>If the cash basis is used, any losses can only be carried forward \u2013 they cannot be relieved against other income or carried back. A number of options are being considered, but it does look as if loss relief rules will be relaxed, just not to the extent that relief is available where normal accounting rules are used.<\/li>\n<\/ul>\n<p>HMRC\u2019s guide to the cash basis can be found <a href=\"https:\/\/www.gov.uk\/simpler-income-tax-cash-basis\">here<\/a>. Our <a href=\"https:\/\/devstagesite.co.uk\/smhgroup\/chartered-accountants\/\"><span style=\"text-decoration: underline;\"><strong>Sheffield based Accounting &#038; Business Advisory<\/strong><\/span><\/a> can also help on <strong>0114 266 4432<\/strong> or <a href=\"mailto:info@smh.group\"><span style=\"text-decoration: underline;\"><strong>info@smh.group<\/strong><\/span><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>With basis period reform now underway, HMRC is looking at further tax simplification for sole traders and partnerships by increasing the cash basis turnover threshold. The cash basis scheme removes complexities such as accruals and most capital allowances.<\/p>\n","protected":false},"author":4,"featured_media":22181,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[3],"tags":[632,1000,11,76],"class_list":["post-24645","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-smh-accounting-business-advisory","tag-cash","tag-cash-basis-reform","tag-hmrc","tag-vat"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Cash basis reform: potential turnover threshold changes - SMH Group - Sheffield based Accounting &amp; Business Advisory<\/title>\n<meta name=\"description\" content=\"With basis period reform now underway, HMRC is looking at further tax simplification for sole traders and partnerships by increasing the cash basis turnover threshold. 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