BIM74105 - Abolition of the cash basis: when to ask questions

This guidance relates to accounting periods before the issue by the Accounting Standards Board (ASB) of Urgent Issues Task Force (UITF) Abstract 40 in March 2005. UITF 40 applies for accounting periods ending on or after 22 June 2005. Further guidance is at BIM74200 onwards. See in particular Appendix 2 paragraph 1 in BIM74275 in relation to the ICAEW’s guidance TAX30/98 (see BIM74130).

When something happens for the first time

As always the best time to ask questions is when something happens for the first time. It is not a good idea to wait until a basis has been in place for several years and then challenge it. The first entry in tax returns relating to the new basis will be when the first instalment of the ’catch-up’ charge is returned for the year ended 5 April 2000 (except for those with 5 April accounting year ends, see above). This gives you the opportunity to enquire into the new basis, since the calculation of the ’catch-up’ charge depends on the new basis. Bear in mind, however, that the fact that the ’catch-up’ charge is spread over a ten-year period may actually give an incentive to over-value work in progress rather than, as you might expect, to under- value it.