Update Notice on MTD for Income Tax ...

... setting out the information that a relevant person must send to HMRC quarterly using software

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Regulations 6 and 8 of The Income Tax (Digital Requirements) Regulations 2021, as amended by The Income Tax (Digital Requirements) (Amendment) Regulations 2024, set out the requirements with which relevant persons must comply under MTD for Income Tax including the requirements to:

- use MTD-compatible software to keep and preserve their business records (business income and expenses) digitally; and

- send quarterly updates (QUs) of their records to HMRC using MTD-compatible software.

This new Update Notice (published at the end of last week) sets out the information that a relevant person must submit in those QUs.  Details of the Notice will be found at https://www.gov.uk/government/publications/update-notice-for-making-tax-... - but the key is that the QU information which must be provided is dependent on the relevant person’s business/es per the following summary:

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- A relevant person with TRADING INCOME:

 * totals of the amounts falling within income (2 categories) and within expenses (14 categories)

- A relevant person with PROPERTY INCOME:

 * totals of the amounts falling within income and within expenses - but where the number of categories of each, and what they include, varies according to whether the property is UK or Foreign or EEA located (with each type reporting separate totals)  [Note: expenses means *both* allowable and disallowable]

- BUT a person with annual turnover below the VAT registration threshold may choose to provide just the total of all income and the total of all expenses (instead of the totals of the amounts falling within each category listed).

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ALSO, in terms of the 'keep and preserve their business records digitally' requirement, a person with a Retail trade may choose to maintain their digital sales records as a single digital record of the daily gross takings (for any retail sales made).

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In true GOV.UK fashion for a simplified summary, this Update Notice manages to be both over-simplistic in places and yet totally confusing in others ... so let's hope that the missing clarity exists somewhere within HMRC and in any specifications provided to software developers (assuming they're still interested).

After all, this is the easy bit (defining which 'totals' need to be reported, on a cumulative YTD basis, in each of 4 QUs per tax year) ... but we still have next to no information on the end-to-end process (including whatever the latest replacement of EOPs is called or contains and how all this 'integrates' with accrual accounting and actual tax due) - NOR on the 'big whoopsies' (which I've heard as slang for the unresolved issues that HMRC were told about early on but for which they are still 'considering possible options').

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Don't forget, this was one of the major announcements last week as part of the big PR push - exemplified by the Aweb articles: "HMRC confident in April 2026 MTD ITSA target" and "HMRC digs heels in and claims MTD is all on track"   I'm not sure which is more worrying ... the continuing lack of detail, the claim from HMRC that everything is on track or the (increasingly faint) possibility that they actually believe that claim!

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P.S: if you're wondering, this is a follow-up to my post last week titled "Yes it's that time - when HMRC 'big guns' ... start to panic (aka put the PR machine into overdrive) re MTD ITSA. Another year, another planet" - but I felt that posting comments of this size was making that thread unwieldy, so started a fresh one.

Replies (15)

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By ireallyshouldknowthisbut
27th Feb 2024 09:05

Id not worry about it

Its not going to happen, and if it does its going to be totalling unenforcable. Just get the client or a third party minimum wage type to ping 2 numbers a quarter to HMRC. Any old numbers will do they wont be able to tell what has happened this end.

Ill probably find somone to do it for our clients and just file the final figures and I can wash my hands of the whole madness.

Thanks (4)
the sea otter
By memyself-eye
27th Feb 2024 09:07

A lot of VAT deregistrations coming, methinks.

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By David Ex
27th Feb 2024 10:06

FactChecker wrote:

- A relevant person with PROPERTY INCOME:

 * totals of the amounts falling within income and within expenses - but where the number of categories of each, and what they include, varies according to whether the property is UK or Foreign or EEA located (with each type reporting separate totals)  [Note: expenses means *both* allowable and disallowable]

- BUT a person with annual turnover below the VAT registration threshold may choose to provide just the total of all income and the total of all expenses (instead of the totals of the amounts falling within each category listed).

In what world is reporting next to nothing a useful exercise for HMRC or taxpayers?!

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Replying to David Ex:
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By FactChecker
27th Feb 2024 19:18

An excellent (presumably rhetorical) question ... that HMRC show no signs of acknowledging let alone attempting to answer.

If you identify such a world, I'm sure the Harra would be eternally grateful to you!

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RLI
By lionofludesch
27th Feb 2024 10:49

More pointless than I expected.

I presume the object is to milk penalties.

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Replying to lionofludesch:
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By Carolynne
27th Feb 2024 10:56

lionofludesch wrote:

More pointless than I expected.

I presume the object is to milk penalties.

.... and make money for the software companies - bleeding the lower income tax payers dry who will also then have to pay more for accountancy services.

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Replying to Carolynne:
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By JB101
27th Feb 2024 12:18

As someone who a) has clients in the software industry and b) makes money from providing accountancy services, I'm not sure I feel too upset by your summary!

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Replying to JB101:
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By Carolynne
27th Feb 2024 13:01

JB101 wrote:

As someone who a) has clients in the software industry and b) makes money from providing accountancy services, I'm not sure I feel too upset by your summary!

It may surprise you to know that a lot of accountants do not want to have to take on this work. It will be a nightmare to administer timewise, and the clients HMRC are targeting are the ones who won't have their paperwork together at the appropriate times and won't want to pay for the additional services. They will be more trouble than they are worth and not very profitable.

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Replying to lionofludesch:
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By FactChecker
27th Feb 2024 19:22

... or maybe HMRC truly are on another planet - one where Pointless isn't just a TV show but the metric used to measure the 'winners' in the tax collection game?

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By AdamJones82
27th Feb 2024 17:18

I can't post pictures on this forum, but this reminds me of a Simpsons episode when Homer got a nodding-bird type of model next to a computer keyboard so it kept tapping a key without him having to do anything.
That will be my MTD quarterly submission "employee" and I'll give updated figures at the year end as normal!

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Replying to AdamJones82:
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By FactChecker
27th Feb 2024 19:14

Love it (even without the picture that I can visualise).

But, in case you're thinking of trialling the concept (beyond raising a virtual finger to their vision of a digital world), then don't be fooled by the lack of information regarding whatever will be trundled out as son-of-EoPS.

Even HMRC won't propose a 'solution' where the final filing obviously bears no relationship to the preceding QUs ... so expect, at a minimum, a need to have to accompany your 'normal year-end figures' with a set of (made-up) adjustments that are basically the delta from QUs to final.
Absolutely pointless and a waste of your time - but without that or some very similar figleaf, HMRC would have to openly admit that it had all been lies.

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By FactChecker
28th Feb 2024 15:43

Of course, when building new systems the structural integrity of the foundations is paramount ... so HMRC must be confident of their preparatory work after reading the conclusions in the latest PAC report - including:

"HMRC’s customer service levels are at an all-time low because of conscious choices made by HMRC and HM Treasury. Since we last reported in January 2023, performance has continued to deteriorate ..."
and
"HMRC did not meet any of the service standards it set to measure its customer service performance in 2022–23".

Foundations are rock solid, Jim, so safe to continue building ...?

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By fmuk
29th Feb 2024 12:20

I’m wondering if HMRC has heard of VAT bridging software, or do they believe all MTD VAT Returns are completed by Digital MTD-compliant software?

Maybe, just maybe someone will come up with MTD ITSA bridging software, so there is no need to compromise our client's current accounting systems in a rush to submit quarterly offerings.

Oh, yes, they have already, so no need to worry about quarterly reporting. Hire an apprentice to bang in the same 2 numbers each quarter, charge the client for the privilege, job done.

Accountants can continue to provide clients with valid annual accounts which will continue to show fair and proportionate profits. (appropriately adjusted for the quarterly rubbish submitted)

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Morph
By kevinringer
29th Feb 2024 13:14

"BUT a person with annual turnover below the VAT registration threshold may choose to provide just the total of all income and the total of all expenses"

So they are still required to digitise their transactions and submit quarterly updates, but after all that time and effort, all they will be reporting is 2 figures. What a farce.

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Replying to kevinringer:
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By FactChecker
29th Feb 2024 16:28

Exactly!

Whilst a lot of us are focussed on having next to no information on the end-to-end process (like how all this 'integrates' with accrual accounting and actual tax due) ... that single 'compromise' by HMRC illuminates the lie of all their 'justifications'.

Fully digitised transactions (pah!) and forecasts of tax due (yikes!) ... all looking as about as likely as those scenes in (my bad attempt at) a Scooby-Doo storyline.

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