Published on 16 January 2024
Finance bill briefing: Clause 16 and Schedule 10: Provision relating to the cash basis
![a calculator, a magnifying glass and a pad of squared paper with the words 'Cash basis' written on the top sheet along with an illustration of a stack of money a calculator, a magnifying glass and a pad of squared paper with the words 'Cash basis' written on the top sheet along with an illustration of a stack of money](/sites/default/files/styles/responsive_600w/public/2024-01/finance_bill_briefing_clause_16_and_schedule_10_provision_relating_to_the_cash_basis.png?itok=HZMFktO-)
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We are generally supportive of these changes as making the cash basis the default way to prepare business accounts will formalise the way some low-income unrepresented traders are currently, and technically incorrectly, completing their tax returns.
However, we have a number of concerns about the expansion of the cash basis. These are:
- the timing of the new rules starting from April 2024 as this is also the first year of the new Basis Period Reform rules (following the 2023/24 transition year);
- there needs to be improved guidance clarifying areas which low-income unrepresented businesses struggle with, such as the timing of receipts and payments under the cash basis, in particular when trading through digital platforms;
- HMRC need to develop a compliance approach for taxpayers who realise they have been preparing their tax returns incorrectly using the cash basis but not electing to do so. We recommend that HMRC apply a sensible and ‘light-touch’ approach regarding any genuine errors which come to light following the move to these new rules.