Rules restricting deductionsU.K.
6U.K.Chapter 4 (trade profits: rules restricting deductions) is amended as follows.
7U.K.After section 32 insert—
“Cash basis accountingU.K.
32AApplication of Chapter to the cash basis
(1)The following sections do not apply in calculating the profits of a trade on the cash basis—
section 33 (capital expenditure),
section 35 (bad and doubtful debts),
sections 36 and 37 (unpaid remuneration),
section 43 (employee benefit contributions: profits calculated before end of 9 month period),
sections 48 to 50B (car hire).
(2)For rules restricting deductions that apply only where profits are calculated on the cash basis, see the following—
section 33A (cash basis: capital expenditure),
section 51A (cash basis: interest payments on loans).”
8U.K.After section 33 insert—
“33ACash basis: capital expenditure
(1)In calculating the profits of a trade on the cash basis, no deduction is allowed for items of a capital nature, other than expenditure that—
(a)if it were not allowable as a deduction in calculating the profits of the trade, would be qualifying expenditure within the meaning of Part 2 of CAA 2001 (plant and machinery allowances), and
(b)is not expenditure incurred on the provision of a car.
(2)In this section “car” has the same meaning as in Part 2 of CAA 2001 (see section 268A of that Act).”
9U.K.In section 38 (restriction of deductions in respect of employee benefit contributions), after subsection (2) insert—
“(2A)In calculating for income tax purposes the profits of a trade on the cash basis, this section has effect as if—
(a)in subsection (1), the words “or to be made” were omitted, and
(b)in subsection (2), the words “or within 9 months from the end of it” were omitted (in both places).”
F110U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F1Sch. 4 para. 10 omitted (with effect for the tax year 2024-25 and subsequent tax years) by virtue of Finance Act 2024 (c. 3), Sch. 10 paras. 46(a), 47 (with Sch. 10 paras. 48-50)
11(1)Section 55A (expenditure on integral features) is amended as follows.U.K.
(2)The existing provision becomes subsection (1).
(3)After that subsection insert—
“(2)But section 33A(3) of CAA 2001 does not apply in calculating the profits of a trade on the cash basis.”