Rental Income changing to cash basis

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JodieR
JodieR Registered Posts: 1,002 Beyond epic contributor 🧙‍♂️
in General accounting discussion
Client rents out one property at £300 per month. He's rented it out for the past 15 years to the same tenant and tenant has usually been good at paying on time. Rental accounts have always been prepared on accruals basis. However, in the past couple of years the tenant has been struggling to pay the full amount of rent and is currently over £2k in arrears. The landlord doesn't want to kick them out as in all other respects they're a good tenant and he doesn't 'need' the money. It hasn't been written off as a bad debt as the tenant will pay it in the future if they are able too, but I would like to switch him to the cash basis so that he's not paying tax on money which he may well never get. I know that you can use the cash basis for rental income under £15k but one of the other rules of using this basis is that it's used consistently - does this mean that it must be used from the first time the property is rented out or could I switch to it now?

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  • burg
    burg Registered, Moderator Posts: 1,441 mod
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    I believe you can switch. I think the consistently just refers to all income and expenses i.e. you can't do some accruals and some cash basis.
    Regards,

    Burg
  • hunterhouse
    hunterhouse Registered Posts: 17 Dedicated contributor 🦉
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    burg said:

    I believe you can switch. I think the consistently just refers to all income and expenses i.e. you can't do some accruals and some cash basis.

    This is how I see it. Of course adjustments will need to be made to avoid "double counting" when the cash basis is first adopted.

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