Cash Basis

Question 1

Conditions for a ST

Answer 1

Total business receipts from all of the individuals sole trade businesses must not exceed £150,000 in the tax year the elction is made.

Question 2

Short period / Long period

Answer 2

The 150,000 limit needs to be time apporitoned for shorter period but not longer periods

Question 3

How to claim election and how it works (3)

Answer 3

Tick cash basis box on SA tax return. Applies to all subsequent tax years.
Applied to income tax and NIC
All income accounted for when received
All expenses accounted for when they are paid

Question 4

When does the election cease.

Answer 4

The election ceases in the TY following a TY where total receipts exceeded £300,000 and the CY total receipts are more than £150,000

Question 5

Conditions for Partnership

Partnership which cannot elect

Answer 5

No controlling partnersher - Only the total receipts from the partnership are taken into account when comparing to the £150,000 threhold. No effect on partnership other businesses

Controlling partner - Take into account the total receipts of partnership and the total receipts from controling partners other trades. If cash basis elected must be applied to all.

Partnership with have a corporate memeber can not elect
LLP can not elect

Question 6

Capital expenditure - general rule

Answer 6

General rule - capital expenditure is allowed as deduction on the business proprtion therefore no capital allowance can be claimed

Question 7

Exceptions to capital expenditure as a deduction (5)

Answer 7

Car - capital allowance are claimed
No relief on aquisiton or disposal of buisness
No releif on capital expenditure on training and educations
No relef on non depreciating assets (UEL greater than 20 years or one where the sale proceeds will be more than 10% of the orginal cost
No SBA

Question 8

Implications of capital expenditure being an allowable deduction

Answer 8

When P&M is sold the sale proceeds are added to the trading income .
If change in proprotion of business use, profits added based on MV
If P&M no longer used in trade MV borught in as trading income

Question 9

Good for own use

Answer 9

The cost of the good are disallowed

Question 10

Interest

Answer 10

Maximum of £500 allowed as deducted expenses for interest payment or incidental cost of obtaining finance

Does not apply for hire purchase costs

Question 11

Leaseing a car

Answer 11

no 15% restriction applies for dirty cars

Question 12

Flat rate on vehicles

Answer 12

If flat rate claimed on car expenses no CA on car
If flat rate claimed on van/ motorbike expenses cost of vehicle not a deducatble expense

Question 13

Premium on the grant of a lease

Answer 13

Not entitled to an relief

Question 14

Accruals to cash basis

Answer 14

Adjustment
Opening debtors + stock - opening creditors = Adjusted Expense

Question 15

Cash basis to Accurals

Answer 15

Adjustment
Opening debtors + stock - opening creditors = Adjusted Income

Question 16

Using cash basis and ceasses to trade

Answer 16

Any stock or WIP needs to be accounted as trading income in the year of cessation

Question 17

Losses under cash basis

Answer 17

Losses can only be carried forward and offset against future profts
No sideway loss relief
Temrinal loss relief is still available