Tax Video Update - Simplified Tax Accounts
30 April 2013 •
WARRENER STEWART TAX UPDATE
SIMPLIFIED TAX ACCOUNTS
What is the change?
The draft Finance Bill 2013 includes the provision to allow cash accounting for new and existing unincorporated businesses from 6 April 2013.
What is cash accounting?
Cash accounting is a straightforward accounting method which will mean that tax liabilities are based on actual money received by the business less amounts actually paid out. This is different from current legislation that expects you to account for unpaid trade debtors and creditors.
To qualify:
- You must have turnover below £79,000.
- You must be unincorporated i.e. not a Limited company or LLP.
- Once you are in the scheme you must deregister once your turnover exceeds £158,000.
Can new and existing businesses join?
Yes, new unincorporated businesses will automatically enter the scheme. Existing businesses can also join the scheme but there will be an “opening adjustment” which adjusts the tax advantage for being a cash basis tax flier over a 6 year period.
Conclusion
Any simplification is good news for HMRC. However, they have introduced special rates and restrictions that may make it inappropriate for your business. As an existing client, we will automatically appraise the position when we complete your 2013/14 tax return and so this is for your information only and no action is required from you at this stage.