Income Tax (Trading and Other Income) Act 2005 section 334B

Entering the cash basis

Section 334B defines when a person carrying on a property business is treated as having "entered the cash basis" for a particular tax year.

• A property business owner enters the cash basis when they switch from the traditional accruals method to the cash basis of calculating profits.
• Two conditions must both be met: the business profits must be calculated on the cash basis for the current tax year, and must have been calculated under GAAP (generally accepted accounting practice) for the previous tax year.
• This definition matters because specific adjustment rules apply in the year a person transitions into the cash basis.
• If the business was already using the cash basis in the previous year, the person has not "entered" the cash basis — they are simply continuing to use it.