MTD ITSA reporting

  • 20th July 2022

HMRC has issued a consultation document on the Notices which will be issued under the Income Tax (Digital Requirements) Regulations 2021 – ie the MTD ITSA regs.

There are no formal questions in this consultation – it is just advance warning of the core parts of four MTD ITSA Notices, those which will have legal effect.

This is what you need to know.

There will be five different lists of data to be provided in quarterly updates, varying according to the category of business undertaken:

  1. Trades and professions (not partnerships)
  2. UK property excluding furnished holiday lettings (FHL)
  3. Overseas property excluding FHL
  4. FHL in UK
  5. FHL in EEA countries

The data categories requested for the above business types appear to be identical to those required to be reported on the current self-assessment tax return forms, so no surprises there.

However, it appears from the consultation that ALL businesses with turnover under the VAT registration threshold (frozen at £85,000 until April 2024) will be able to submit just two figures in each quarterly update:

  • total income; and
  • total expenses

This is the equivalent to the “three line accounts” which many small traders submit.

According to the MTD con doc this simplification will also be available to property businesses, which raises a number of questions, including how residential landlords will claim the basic rate tax credit relief on loan interest. We have asked HMRC for clarification of this point.

The data required to be reported on the end of period statement (EOPS), which needs to be filed for each trade/ property business, will be the sum totals of the amounts reported in the quarterly updates. When only two figures (income and expenses) are submitted in the quarterly update, only those two totals will be required in the EOPS, not the full range of expenses.

The EOPS will also include deductions/ additions for; capital allowances, balancing charges, averaging claims, property losses, private use adjustments etc. Any disallowable expenses must be removed before the EOPS is submitted.

Retail businesses will be able to digitally record gross daily takings instead of every single sale made in a day.

There are still many unanswered questions around MTD ITSA, and we will keep you up to date as more information is released.

Consultation on MTD ITSA reporting

This information is taken from the weekly Tax Tips, published by the Tax Advice Network, for which you can subscribe at www.TaxAdviceNetwork.co.uk


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