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

Election for profits to be calculated in accordance with GAAP

Section 25C allows a trader to elect out of the cash basis so that their trading profits are instead calculated in accordance with generally accepted accounting practice (GAAP).

• A person carrying on (or who has carried on) a trade that is not an excluded trade may elect for profits to be calculated under GAAP rather than on the cash basis.
• The election takes effect from the tax year for which it is made and continues for every subsequent tax year unless it ceases to have effect.
• The election ceases to have effect if the trade becomes an excluded trade for a tax year, or if the person makes a further election to return to the cash basis for a subsequent tax year.
• Even after an election ceases to have effect, the person is not prevented from making a fresh GAAP election for any later tax year.