ADVISORS HAVE URGED CAUTION as the government confirmed that it will introduce cash accounting for small, unincorporated businesses from April 2013.
The latest note, buried in the Treasury’s Autumn Statement document, says that the cash basis for calculating tax will be available for businesses with receipts up to £77,000, and will be able to continue to use the cash basis until receipts reach £154,000.
But, without the legislation outlined, advisors warned that concerns over some businesses moving across without realising they could be worse off, still exist.
“Be wary of signing up to it,” said CheapAccounting.co.uk founder Elaine Clark.
“There are lots of ways you could be worse off, so make sure you compare [with accruals accounting].”
The ICAEW believes that £30,000 should be the cut-off point for allowing cash accounting, as opposed to up to the £77,000 VAT threshold.
“There is a role for cash accounting, but not where there’s lots of stock and debtors etc, where normal business accounting rules need to be applied,” said Anita Monteith, ICAEW tax faculty technical manager.
Monteith also warned advisors that impending details on the Universal Credit, the benefits simplification system, will arrive next week and as such would cross over with those that might use cash accounting.
On this point she raised concerns that stakeholders would only have a few days to comment on how the credit has been structured.
“We will only have four days to respond [to the Universal Credit details]. It will be of importance to advisors because of the overlap of the cash basis for Universal Credit. – advisors will need to be more involved in [benefits].”
Similar issues will need to be considered by small businesses over new expenses plans – in that they will be able to use flat rates to work out some types of expenses, rather than undertake calculations.
The Office of Tax Simplification will also look into finding a way to simplify the taxation of employee benefits, expenses and employee termination payments.
Accountancy Age's pub video magazine extravaganza includes Deloitte on the hunt for tech; the PAC dishing out more woe for HMRC; and Sports Direct's take on corporate governance reform
There are 50 forces leading change in the global public sector that accountants need to prepare for, say ACCA
Corrective action has been taken by Sports Direct into its international stores reporting, following a review by accounting's watchdog
The UK consumers “may not benefit” from the European Commission’s proposals on e-books