Income Tax (Trading and Other Income) Act 2005 section 221A

Claim not available where cash basis used

Section 221A confirms that the relief provisions in Chapter 16 (which deal with averaging of profits for certain trades) do not apply where a trader calculates their profits using the cash basis of accounting.

• Chapter 16 relief provisions are completely disapplied for cash basis traders
• This means profit averaging claims cannot be made under the cash basis
• The restriction was introduced by Finance Act 2013 as part of the cash basis rules
• Traders wishing to use profit averaging must calculate their profits using the accruals basis instead