Income Tax (Trading and Other Income) Act 2005 section 130A

Chapter not to apply where cash basis used

Section 130A disapplies the rules in this chapter on deductions for capital allowances and charges on income when a business uses the cash basis of accounting.

• This section was introduced by Finance Act 2013 and applies from the 2013–14 tax year onwards.
• If a trade calculates its profits using the cash basis, none of the provisions in this chapter apply.
• Under the cash basis, income and expenses are recognised when money is actually received or paid, rather than when they are earned or incurred.
• Businesses using the cash basis follow a simpler set of rules for deductions, so the more complex capital allowance provisions in this chapter are not needed.