Is AIA relevant if I use cash basis accounting?
Sole traders and partnerships using cash basis normally deduct qualifying equipment purchases as business expenses instead of claiming AIA. Cars have separate capital allowance rules and do not qualify for AIA.
These answers provide general information, not advice tailored to your circumstances. Rules can change and exceptions may apply — speak to the CASS team before making a tax, accounting or financial decision.
Your accounting method matters
Cash basis changes how an eligible sole trader or partnership claims relief for many equipment purchases. Qualifying costs are normally deducted as business expenses when paid, rather than claimed through AIA. HMRC states that businesses using cash basis can generally claim capital allowances only on business cars. Cars are excluded from AIA, so a different allowance or an eligible mileage method may apply. Cash basis is different from the VAT Cash Accounting Scheme. Being on that VAT scheme does not establish how you calculate taxable business profits. CASS can check your accounting method and the particular purchase so you claim the cost through the right route.
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