BIM74035 - Abolition of the cash basis: what is the annual amount of the ‘catch-up’ charge?

The amount assessable is limited to 10% of taxable profits

For each of the first nine years of assessment in the spreading period the proportion to be taxed in each year is

• one tenth of the catching up charge, or
• 10% of the taxable profits of the profession or vocation (ignoring capital allowances) for that year of assessment

whichever is the lower - FA98/SCH6/PARA4 (4)(a), (b).

For the tenth year the remaining balance of the catching up charge is taxed - FA98/SCH6/PARA4 (5).

If, before the whole of the catch up charge has been charged to tax, the profession or vocation is

• permanently discontinued, or
• treated as permanently discontinued under ICTA88/S113 (1)

the catch up charge continues to be charged to tax under the arrangements described above with the exception that the abatement of the charge if profits (before capital allowances) fall below 10% of the charge no longer applies - FA98/SCH6/PARA4 (6).

In the event of the death of a person (who, if they had not died, would have been liable to assessment on the catch up charge) the tax that would have been charged on them is chargeable on their personal representatives and recoverable out of their estate. The personal representatives may make any election under FA98/SCH6/PARA5 (see BIM74045) that the person could have made.