Which of the following payment types is NOT considered allowable for businesses under cash basis rules?

Under cash basis accounting, businesses recognize income and expenses only when cash is actually received or paid. This approach simplifies recordkeeping, especially for small businesses. Among the payment types listed, interest over £500 on loans is not allowable for businesses under cash basis rules, primarily because cash basis accounting has specific restrictions on how certain expenses, particularly interest on loans, can be handled.

The cash basis rules allow businesses to deduct interest payments only up to a certain threshold. When interest payments exceed £500, they must be recorded on an accrual basis rather than cash basis, meaning that the business has to account for this expense when it is incurred, rather than when it is paid. This ensures that larger interest obligations are reported accurately in financial statements, providing a clearer picture of the business’s financial situation.

In contrast, payments for business expenses, payments for plant machinery not including cars, and full lease payments can all be recorded under cash basis rules because they do not have the same restrictions and are straightforward cash transactions at the time of payment. Thus, option C stands out as it deviates from the allowable payment types under the cash basis rule.