Income Tax (Trading and Other Income) Act 2005 section 31E

Calculation of profits on cash basis

Section 31E sets out how to calculate the profits of a trade, profession or vocation when using the cash basis of accounting for income tax purposes.

• The cash basis applies equally to trades, professions and vocations.
• Step 1: add up all trade receipts actually received during the basis period for the tax year.
• Step 2: deduct from that total all trade expenses actually paid during the same basis period.
• The resulting profit figure is subject to any further adjustments required or authorised by law for income tax purposes.