Income Tax (Trading and Other Income) Act 2005 section 56A

Application of Chapter to the cash basis

Section 56A summarises how the rules on allowable deductions in Chapter 5 apply when a trader calculates their profits using the cash basis rather than the accruals basis.

• Certain deduction rules that apply under the accruals basis are switched off when using the cash basis, including the rules on tenants under taxed leases (sections 60 to 67).
• Traders using the cash basis should refer to section 57B for specific rules on deducting interest payments on loans.
• Under the cash basis, any reference in Chapter 5 to "incurring" expenses is read as a reference to "paying" expenses, meaning that the timing of actual payment determines when a deduction is available.
• This section was introduced by Finance Act 2013 and has been amended by Finance Act 2016 and Finance Act 2024.