The Chancellor is to proceed with proposals to make the tax system simpler for small unincorporated businesses from April 2013. Where a business has a turnover up to £77,000 it will be able to calculate its profits on a simplified cash basis. In addition it will not have to distinguish between revenue expenditure and capital expenditure. A business will be able to continue to use this basis until its turnover reaches £154,000.
Flat rate expenses will be available for some types of expense including:
Cars, vans and motorcycles
For cars or vans the rate for the first 10,000 business miles is 45p, after which the rate reduces to 25p. For motorcycles the rate is 24p
Business use of a home
Provided certain conditions are satisfied, the following monthly rates will be allowed:
Business use in a month
25 hours or more
51 hours or more
101 hours or more
The new rules are not quite as simple as the Government would have us believe. Whilst the actual accounting treatment may be simpler it will still be necessary to have regard to tax rules for the deductibility of some expenses. There will also be transitional rules for existing businesses wishing to opt into the new system.
Please do get in touch if you think this may be of interest to you.
Internet link: HMRC update