HMRC issued a consultation paper on the 27th March inviting comments until 22nd June 2012.
From April 2013, the Government proposes to introduce a voluntary cash basis for small businesses to calculate their income tax along with simplified arrangements for some business expenses.
The proposals are, that those who choose to use the new regime will be taxed on the basis of their receipts less allowable payments for expenses, rather than needing to spend their time doing accounting designed more for big business.
The Government is exploring proposals that small businesses with receipts of less than £77,000 would be eligible to use the cash basis, and that they could continue to use it until their receipts rise to more than £150,000 in any year.
Some accountants are concerned that this will mean they lose business as their services won’t be needed but others are concerned that the self employed could end up paying the wrong tax because of issues such as pre-trading expenses.
Soon we will find out the results.