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

Calculation of profits on the cash basis

Section 271D defines what it means to calculate the profits of a property business on the cash basis, requiring income and expenses to be recognised when actually received or paid.

• Under the cash basis, rental income is recognised when received and expenses are recognised when paid, rather than when earned or incurred.
• The basic cash basis calculation is subject to any adjustments required or authorised by law for income tax purposes.
• Special rules apply to lease premiums (section 276A) and to deductions and receipts (section 307A) when a property business uses the cash basis.
• Certain provisions apply exclusively to cash basis property businesses, including section 272ZA (trading income rules for the cash basis) and Chapter 7A (adjustments for capital allowances).