MTD ITSA Reporting Requirements from April 2024

09/07/2022 - 10 minutes read

MTD ITSA Reporting requirements from April 2024 have been confirmed by HMRC in the draft legislation published last week.

Making Tax Digital (MTD) for Income Tax will apply to relevant persons (unincorporated businesses and landlords) with business and/or property income over £10,000.

MTD ITSA Reporting Requirements from April 2024

MTD ITSA Reporting Requirements from April 2024

The Income Tax (Digital Requirements) Regulations 2021 (SI 2021 No 1076) set out the requirements that relevant persons must comply with under MTD for Income Tax. These include the use of MTD-compatible software to keep and preserve their business records (business income and expenses) digitally, send quarterly updates of their records to HMRC, and submit an end-of-period statement to HMRC.

HMRC’s draft notices for MTD ITSA Reporting requirements confirm that there are five different types of quarterly updates depending upon the type of business:

  1. Businesses with trade profits
  2. Businesses with property income (not UK or EEA furnished holiday lets (FHL))
  3. Overseas property (not EEA FHL)
  4. UK FHL
  5. EEA FHL

We discuss MTD ITSA in further detail here.

MTD ITSA Reporting Requirements

Businesses with trade profits (income chargeable under Part 2 of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA))

A relevant person with trading income must provide the following update information in each quarterly update:

  • – quarterly period start date
  • – quarterly period end date
  • – totals of the amounts falling within the categories of transactions set out in the following table:
Transactions that lead to business incomeTransactions that lead to business expenses
TurnoverCost of goods bought for resale or goods used
Other business incomeConstruction industry – payments to subcontractors
Wages, salaries, and other staff costs
Car, van, and travel expenses
Rent, rates, power, and insurance costs
Repairs and maintenance of property and equipment
Phone, fax, stationery, and other office costs
Advertising and business entertainment costs
Interest on bank and other loans
Bank, credit card and other financial charges
Irrecoverable debts written off
Accountancy, legal and other professional fees
Depreciation and loss or profit on sale of assets
Other business expenses

Businesses with property income (income chargeable under Part 3 of ITTOIA

A relevant person with property income must provide the following update information in each quarterly update:

  • – quarterly period start date
  • – quarterly period end date
  • – totals of the amounts falling within the categories of transactions set out in the following table:

UK property (not UK or EEA Furnished Holiday Let (FHL))

Transactions that lead to property incomeTransactions that lead to property expenses
Total rentsRent, rates, insurance, ground rents
Other incomeProperty repairs and maintenance
Tax taken from total rents and other income from propertyResidential property finance costs
Premiums for the grant of a leaseNon-residential property finance costs
Reverse premiums and inducementsLegal, management and other professional fees
Costs of services provided, including wages
Other allowable property expenses

Overseas property (not EEA FHL)

Transactions that lead to property incomeTransactions that lead to property expenses
Total rentsRent, rates, insurance, ground rents
Premiums paid for the grant of a leaseProperty repairs and maintenance
Other receiptsResidential property finance costs
Non-residential property finance costs
Legal, management and other professional fees
Costs of services provided, including wages
Other allowable property expenses

UK FHL

Transactions that lead to property incomeTransactions that lead to property expenses
Rent receivedRent paid, repairs insurance and costs of services provided
Income from any services provided to tenantsLoan interest and other financial costs
Legal, management and other professional fees
Other allowable property expenses

EEA FHL

Transactions that lead to property incomeTransactions that lead to property expenses
Rent receivedRent paid, repairs insurance and costs of services provided
Loan interest and other financial costs
Legal, management and other professional fees
Other allowable property expenses

Turnover below the VAT registration threshold

A relevant person with an annual turnover below the VAT registration threshold, as amended from time to time, may choose to provide the total of all income and the total of all expenses instead of the totals of the amounts falling within each category of transaction listed in Hmrc’s draft notice.

MTD ITSA Reporting requirements for End of Period Notice – made further to regulation 12

The End of Period information that must be provided in an End of Period Statement (EOPS) is dependent on the relevant person’s business or businesses.

A relevant person must provide the following End of Period information in the EOPS:

  • – the totals of the amounts falling within the applicable categories of transactions detailed the Update Notice
  • – the additional information set out at this End of Period Notice

Where a relevant person has not already decided whether the amounts included in each expense category of a transaction set out in the Update Notice include any elements which are disallowable, the relevant person must remove any disallowable expenditure prior to providing the EOPS total for the relevant period.

MTD ITSA Reporting requirements for Additional End of Period information to be provided in the EOPS

Businesses with Trade Profits (income chargeable to Part 2 of ITTOIA)

A relevant person with trading income must provide totals of the amounts falling within the following categories:

  • – Annual Investment Allowance
  • – capital allowances for main pool costs
  • – capital allowances for special pool costs
  • – capital allowances for single asset pool costs
  • – zero-emission goods vehicle allowance
  • – customers’ Premises Renovation Allowance
  • – 100% and other enhanced capital allowances
  • – allowances on sale or cessation of customer use
  • – balancing charge on sale or cessation of customers’ use (only where Customers’ Premises Renovation Allowance has been claimed)
  • – balancing charge on sales of other assets or on the cessation of customer use
  • – adjustment for change of accounting practice
  • – averaging adjustment
  • – adjusted profit or loss for the year
  • – adjustment to profits chargeable to Class 4 National Insurance contributions
  • – zero-emissions car allowance
  • – electric charge point allowance
  • – structures and buildings allowance
  • – (Freeport) enhanced Structured Building Allowance (SBA)

Businesses with Property Income (income chargeable under Part 3 of ITTOIA)

A relevant person with property income must provide totals of the amounts falling within the following categories set out below:

  • – UK property (not UK FHL or EEA FHL):
    • – private use adjustment
    • – balancing charges
    • – annual investment allowance
    • – customers’ Premises Renovation Allowance
    • – zero-emission good vehicle allowance
    • – other capital allowances
    • – cost of replacing domestic items
    • – rent a room exempt amount
    • – loss brought forward used against this year’s profits
    • – adjusted profit or loss for the year
    • – property income allowance
    • – zero-emissions car allowance
    • – electric charge point allowance
    • – structures and buildings allowance
    • – (Freeport) enhanced Structured Building Allowance (SBA)
  • – Overseas Property (not EEA FHL):
    • – private use adjustment
    • – balancing charges
    • – capital allowances for equipment and vehicles
    • – zero-emission goods vehicle allowance
    • – cost of replacing domestic items
    • – adjusted profit or loss for the year
  • – UK FHL:
    • – private use adjustment
    • – balancing charges
    • – capital allowances
    • – adjusted profit or loss for the year
  • – EEA FHL:
    • – private use adjustment
    • – balancing charges
    • – capital allowances
    • – adjusted profit or loss for the year

Turnover below the VAT registration threshold

A relevant person with an annual turnover below the VAT registration threshold, as amended from time to time, may choose to provide the total of all income and the total of all expenses instead of the totals of the amounts falling within each category of transaction listed in the Update Notice.

MTD ITSA Reporting requirements for Retail sales notice – made further to regulation 16

In respect of the retail sales of the business of a retailer digital records means a single digital record of the daily gross takings for any retail sales made.

The gross daily retail sales digital record must include:

  • – all payments as they are received by the relevant person or on the relevant person’s behalf from its own cash-paying retail consumers. This includes payments by cheque, debit or credit card, maestro, visa or similar electronic transactions and electronic cash
  • – the full value of all credit or other non-cash retail sales received by the relevant person or on the relevant person’s behalf. This includes the full value of credit sales, the cash value of payment in kind for retail sales, the face value of the gift, book and record vouchers received and any other payments for retail sales including those sales completed via third-party online sales platforms

The following may be excluded when calculating the amount of daily gross takings:

  • – counterfeit notes
  • – illegible credit card transactions
  • – inadvertent acceptance of a cheque guarantee card as a credit card
  • – inadvertent acceptance of foreign currency (where discovered after their acceptance)
  • – inadvertent acceptance of out-of-date coupons which are not honoured by promoters
  • – instalments in respect of credit sales
  • – receipts recording for supplies which are to be recorded outside of the election
  • – refunds to a consumer for overcharges or faulty/unsuitable goods
  • – float discrepancies
  • – unsigned or dishonoured cheques from cash customers
  • – use of training tills
  • – void transactions

Further details of MTD ITSA Reporting Requirements can be found on the gov.uk website.

How can MCL Accountants help?

Contact MCL Accountants Southend on 01702 593 029 if you have any queries regarding MTD ITSA Reporting requirements or if you need any assistance with the preparation and submission of your business accounts or self-assessment tax returns to HMRC.

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