Income Tax (Trading and Other Income) Act 2005 section 191A

Chapter not to apply where cash basis used

Section 191A provides that the rules in Chapter 14 (which deals with adjustments for changes in accounting basis) do not apply when a trader calculates their profits using the cash basis of accounting.

• Chapter 14 of Part 2 of ITTOIA 2005 contains rules about adjustments required when a trader changes their basis of accounting
• These adjustment rules are completely disapplied where a trade's profits are calculated on the cash basis
• The cash basis is a simplified method of accounting available to certain small businesses, where income and expenses are recognised when received or paid
• Traders using the cash basis should therefore ignore all provisions in Chapter 14 when computing their trading profits