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  • Writer's pictureClive Cass

HMRC update MTD ITSA requirements

HMRC have now published draft notices of the detailed Making Tax Digital (MTD) for Income Tax provisions for consultation.

The consultation was only for the month of July and closed on 28th July. The key requirements on which HMRC have invited views on are – The use of functional compatible software – The information required when submitting quarterly updates and the end of period statement (EOPS) – Retail sales election We will be posting a separate article about the compatible software that is currently available.

Although only 4 are fully compliant, there are almost 20 others at various stages of the approval process. In this article, we focus on the likely required information to be submitted each quarter and in the end of period statement and look at the retail sales election. We now know that each quarter HMRC anticipates receiving;

  • Quarterly period start date,

  • Quarterly period end date, and

  • The totals of the amounts falling within the income and expenditure categories set out in the draft tertiary legislation.

With regard to the latter, depending on whether trading and/or generating income from property, the requirements are:

  • Businesses with trade profits – the requirements mirror the current income and expenditure boxes on the self-employed tax return page SA103F

  • Businesses with property income (including furnished holiday lets) – the requirements broadly mirror the current income and expenditure boxes on the UK property tax return page SA105 but, for overseas property, do seem to require more analysis than required on foreign pages SA106.

  • A relevant person with an annual turnover below the VAT registration threshold (currently £85,000), they may choose to provide the total of all income and the total of all expenses instead of the analysis referred to above. This mirrors the current self-assessment reporting rule for self-employed individuals

In all cases, the information requested is the income and expenditure for the quarter.

To demonstrate, for a sole trade business with turnover above £85,000, the breakdown is listed below.


End of Period Statement

Then, turning to the EOPS, the draft legislation requires the self-employed individual or landlord to provide totals of the amounts in each category discussed above. This will include identifying as disallowable (or ‘removing’) any expenditure not already identified as such in the quarterly updates. Then, in terms of additional information required for the EOPS, for self-employed individuals this will be totals for the following, with similar requirements also applying to landlords:

  • 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

  • Premises Renovation Allowance

  • 100% and other enhanced capital allowances

  • allowances on sale or cessation of use

  • balancing charge on sale or cessation of 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)

HMRC have vowed to explain how individuals can reflect any accounting and tax adjustments, in order to reconcile quarterly submissions to the EOPS, in further guidance to be published later this year.

Retail Sales

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 self-employed retailer

  • the full value of all credit or other non-cash retail sales received by the self-employed retailer

The following can 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

Conclusion

Whilst it may be hard not knowing exactly what is going to be required or having concerns of change, as an industry we must act when we can. With more guidance being published, albeit in draft form, this is an important time to be contacting your clients to make them aware of the latest information, be transparent and to confirm you are always up to date.

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