Income Tax (Trading and Other Income) Act 2005 section 271C

Basis of calculation of profits: cash basis required

Section 271C requires that the profits of a property business must be calculated using the cash basis where none of the conditions requiring the use of generally accepted accounting practice (GAAP) are met.

• The cash basis is the default method for calculating property business profits
• It applies automatically when none of the five conditions (A to E) in section 271A are satisfied
• Under the cash basis, income is recognised when received and expenses when paid
• There is no choice involved — if the GAAP conditions do not apply, the cash basis is mandatory