Cash basis for small businesses
HMRC is urging small businesses with a turnover of less than £79,000 to consider the use of the cash basis scheme for simpler accounting. The new scheme, which has been available since April 2013, saves the need for smaller businesses to make more complex accounting adjustments saving both time and money.
HMRC particularly recommends the scheme for small businesses providing services such as hairdressers, window cleaners, taxi drivers, gardeners, painters and decorators, plumbers and electricians.
Businesses can also choose to use simplified expenses. This involves using flat–rates for expenses relating to the following:
• business costs for vehicles;
• business use of your home; and
• private use of a business premises as a home.
HMRC’s Carol Lunney said:
‘The cash basis and simplified expenses schemes can help save small businesses time and money. With a new tax year on the horizon, now is the time to start thinking about them. So, if you’re eligible, go online and find out more about the schemes at GOV.UK.’
The threshold to use the scheme mirrors the VAT registration threshold. An announcement to increase the VAT registration limit is usually made as part of the Budget measures and would apply from 6 April 2014. In addition, once a business has entered the cash basis scheme they can continue to report in this way until their income reaches double the VAT threshold.