Income Tax (Trading and Other Income) Act 2005 section 227B

Cash basis treatment: full relief under Chapter 1 of Part 6A (trading allowance)

Section 227B addresses how the cash basis rules interact with the trading allowance where an individual's trade profits or losses are treated as nil under the full relief provisions.

• Applies where an individual carries on a trade in a tax year and claims full relief under the trading allowance, so that profits or losses are treated as nil
• Full relief is available where the conditions in section 783AE(2) are met — broadly, where trading income does not exceed the £1,000 trading allowance
• Where full relief applies, the cash basis is treated as not applying to the trade for that tax year, for the purposes of Chapter 17
• This ensures there is no conflict between the trading allowance provisions and the cash basis adjustment rules in Chapter 17