The cash basis scheme helps many sole traders and other unincorporated businesses benefit from a simpler way of managing their financial affairs. The scheme is not open to limited companies and limited liability partnerships. The scheme allows qualifying businesses to use the cash basis when recording income and expenditure. However, some smaller businesses are more suited to using the case basis than others.
The scheme is most suitable for straight forward businesses especially those that provide services. Firms must have a turnover of £150,000 or less to join the scheme and they can continue using the scheme until their turnover reaches £300,000.
If clients wish to use the cash basis, they must also meet the following conditions:
Clients considering the use of the cash scheme, and who elect to use the cash basis for a tax year, must use the cash basis for each trade they carry on during that tax year.