Tyas & Company
Chartered Accountants, Registered Auditors, Tax, Business Advisors
Thursday, 02 May 2019 23:01

Treatment of capital expenditure if using the cash basis

The cash basis scheme helps many sole traders and other unincorporated businesses to manage their financial affairs. The scheme is not open to limited companies and limited liability partnerships. Using the scheme, allows qualifying businesses to use the cash basis when recording income and expenditure.

You must have a turnover of £150,000 or less to join the scheme and you can continue using the scheme until your turnover reaches £300,000. However, certain small businesses are more suited to using the case basis than others. The scheme is most suitable to relatively modest businesses especially those that provide services.

If you are using the cash basis scheme, then capital expenditure is usually treated as an allowable business expense with the following exceptions:

  • The acquisition or disposal of a business or part of a business
  • Education or training
  • The provision, alteration or disposal of certain non-depreciating assets, assets not acquired or created for continuing use in the trade, land, non-qualifying intangible assets and certain financial assets.

In addition, if you buy a car you can claim the purchase as a Capital Allowance on the condition that the business mileage rate has not been claimed on the car. This is because the rate already contains an element to allow for depreciation.

 

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Stephen Tyas                             Stephen Ayres

 

 

Registered to carry on audit work in the UK as GBJ
Limited Liability Partnership by the Institute of
Chartered Accountants in England and Wales

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