Income Tax (Trading and Other Income) Act 2005 section 25B

Excluded trades

Section 25B defines which trades are "excluded trades" that cannot elect into the simplified cash basis of calculating profits under GAAP rules, because they have features that make them unsuitable for the standard cash basis.

• A trade is excluded if it is carried on by a partnership that includes a non-individual partner (such as a company), or if it is carried on by a limited liability partnership at any time during the tax year.
• A trade is excluded if it benefits from the herd basis rules for livestock, has made a claim for averaging of fluctuating profits, or has received business premises renovation allowances within the previous seven years.
• A trade is excluded if it is a mineral extraction trade at any time during the tax year, or if the trader still owns an asset representing expenditure on which research and development capital allowances were previously claimed.
• The Treasury has the power to amend these exclusion conditions by regulations, but any regulations that would restrict the ability to elect into GAAP-based profit calculation must be approved by the House of Commons.