Income Tax (Trading and Other Income) Act 2005 section 31F

Overview of rest of Part 2 as it applies to cash basis

Section 31F provides a roadmap showing which chapters of Part 2 apply, which are modified, and which are switched off entirely when a trader uses the cash basis to calculate their profits.

• Rules on deductions and receipts in Chapters 4 to 6 are modified for the cash basis, with specific guidance in sections 32A, 56A and 95A, and rules for specific trades are adapted in section 148K
• Two chapters apply only where the cash basis is used: Chapter 6A (amounts not reflecting commercial transactions) and Chapter 17A (adjustments for capital allowances)
• Ten chapters are completely disapplied under the cash basis, including those dealing with herd basis rules, sound recordings, telecommunication rights, long funding leases, trading stock changes, unremittable amounts, know-how, profit averaging, compulsory slaughter compensation and oil activities
• Traders using the cash basis must therefore check carefully which provisions remain relevant, as many of the more complex accruals-based rules simply do not apply to them