Small businesses are being urged in a HMRC news release to consider a scheme that allows them to be taxed on money that flows in and out of their business, rather than using full accounting rules.

The ‘cash basis’ scheme can be used by sole traders and other unincorporated businesses with an annual income less than the relevant VAT registration threshold (which increased to £81,000 from April 2014) to simplify their accounting processes, saving both time and money. The scheme is however subject to a number of restrictions.

In addition, unincorporated businesses can choose to use ‘simplified expenses’. This involves using flat-rates, instead of making complex calculations of actual business expenses. It can be used for the following expenses:

• business costs for vehicles;
• business use of home; and
• private use of a business premises as a home.