Simplified Business Accounting?

From the 2013/2014 tax year it will be possible to use ‘Simplified Business Accounting’ to prepare self-employed accounts for tax returns. The business has to be under the VAT registration threshold in the year they start using the scheme and it doesn’t apply to property businesses of any size nor to limited companies or LLPs. For those able to use it, the new scheme will allow you to use the cash rather than accrual basis. In other words, the accounts are prepared according to how much cash has come in as income and out as expenses. There will be rules for claiming simplified expenses which are likely to restrict the way some the expenses are claimed. For example, interest paid on loans won’t be allowed as an expense and you can’t offset losses against other income in the same year. The exact rules are still under consultation  so we don’t yet know the final details. There are also transitional arrangements for moving to and from the simplified business accounting system.
So, it could be useful for some taxpayers but there are complications and potential pitfalls. Will some people benefit? Quite possibly. Will others lose out? Most likely too. I suspect it will mainly be taken up by taxpayers who don’t use an accountant to prepare their accounts and tax return. For them the process may well appear more straightforward (though the rules aren’t exactly simple). The problem is that they may never know if they have lost out.