Last week the Autumn Finance Bill 2023 was published and had its first reading in the House of Commons. The Bill contains many of the measures announced by the Chancellor in the Autumn Statement the previous week. A date for second reading of the Bill has not yet been scheduled.
HMRC also sent the below message about the announcements in the Autumn Statement in relation to the cash basis:-
“As you hopefully will have seen, at Autumn Statement the government announced that it would be proceeding with the proposals set out in the consultation on expanding the income tax cash basis, which was launched earlier in the year. I would recommend reading the Summary of Responses and Tax Information and Impact Note for further details of these changes, but in summary the government will:
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remove the turnover thresholds for businesses to use the cash basis
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set the cash basis as the default method of calculating taxable profits, with an opt-out for accruals
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remove the £500 limit on interest deductions in the cash basis, aligning the rules with accruals
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remove the restrictions on using relief for losses made in the cash basis, aligning the rules with accruals.
Thank you for your valuable feedback as part of this consultation, and in particular for your feedback on the interest and loss relief restrictions that the government has decided to remove entirely, rather than slightly relax.
Yesterday the Finance Bill was published, which includes legislation to give effect to the expansion of the cash basis at section 16 and schedule 10. I’d encourage you to look over this legislation and let me know if you have any questions or feedback on how it might operate, or if you can see any significant issues or problems with the legislation which would mean that it wouldn’t work as intended.
You may also notice in the legislation that we have removed the need for a business to show that there is a change in circumstances relating to the trade before withdrawing an election to use GAAP (cash basis in the current legislation, section 31D(3)(a)). The election to use GAAP is also particular to a trade, rather than a person as a whole. This better reflects the reality of tax returns showing a box to use the cash basis (in the future, GAAP) per self-employment and partnership page, and allows for a greater degree of flexibility in an individual being able to use GAAP for some of their trades and cash basis for others.
The government has also published a description of the legislation in the accompanying Explanatory Note to the Bill, which provides some extra background for the legislation.”
If you have any feedback in relation to the changes to the cash basis, please get in touch.
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