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MTD: Monthly reports may be needed

Four million taxpayers will need to submit quarterly plus end of period reports for each trade and property business, leading to multiple submissions for different periods under MTD for income tax.

19th Feb 2021
Tax Writer Taxwriter Ltd
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MTD for income tax has now morphed into MTD for income tax self-assessment (ITSA), and HMRC are now referring to the regime as ‘MTD ITSA’.

HMRC estimates there are four million businesses that pay income tax, but who are not VAT registered, so they are not already keeping digital business records. All of these businesses need to enter the MTD ITSA regime from April 2023 (see start dates below).  

What reports are required?

For each trading or property business the taxpayer operates they will have to submit a quarterly report of income and expenses in defined categories. The taxpayer will also have to submit an end of period statement (EOPS) for each of those businesses (the fifth report).

The MTD ITSA regime will incorporate all of the reporting required on the current SA tax return into a ‘finalisation’ or ‘crystallisation’ statement. This statement will bring together all of the information included in the MTD reports, plus other taxable income (such as investment and employment) to calculate the tax liability for the tax year. 

The draft MTD ITSA regulations (see developer hub policy update) indicate that individual landlords must submit separate quarterly updates for each category of property business (eg long term letting, FHL, overseas lettings).

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Replies (210)

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Replying to NH:
RLI
By lionofludesch
08th Mar 2021 11:14

NH wrote:

No of course it does not need to happen , however there does come a point where you might say to a client, look its easier for everyone concerned if you put this through a dedicated bank account.

No - that wouldn't solve the problem.

All four landlords would need dedicated bank accounts receiving a quarter of the rent.

Thanks (0)
Replying to lionofludesch:
blue sheep
By NH
08th Mar 2021 11:28

lionofludesch wrote:

NH wrote:

No of course it does not need to happen , however there does come a point where you might say to a client, look its easier for everyone concerned if you put this through a dedicated bank account.

No - that wouldn't solve the problem.

All four landlords would need dedicated bank accounts receiving a quarter of the rent.


I think you are over complicating it, 1. you need to be able to account for the property income and expenses, that might be easier if you have a dedicated bank account but is not essential 2. you need to be able to submit that data split 4 ways, we do not yet know exactly what and how that will be but if you solve item 1, item 2 flows very simply and quickly from that
Thanks (0)
Replying to NH:
RLI
By lionofludesch
08th Mar 2021 11:44

NH wrote:

lionofludesch wrote:

NH wrote:

No of course it does not need to happen , however there does come a point where you might say to a client, look its easier for everyone concerned if you put this through a dedicated bank account.

No - that wouldn't solve the problem.

All four landlords would need dedicated bank accounts receiving a quarter of the rent.

I think you are over complicating it, 1. you need to be able to account for the property income and expenses, that might be easier if you have a dedicated bank account but is not essential 2. you need to be able to submit that data split 4 ways, we do not yet know exactly what and how that will be but if you solve item 1, item 2 flows very simply and quickly from that

Or it could be that you could be oversimplifying it.

There's a danger that the less tech-able clients will find it impossible to find an agent to help them comply with their obligations. Which helps no-one.

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Replying to lionofludesch:
blue sheep
By NH
08th Mar 2021 12:46

Quite possibly, I am a very simple person....

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Replying to lionofludesch:
avatar
By the_fishmonger
08th Mar 2021 15:46

lionofludesch wrote:

NH wrote:

No of course it does not need to happen , however there does come a point where you might say to a client, look its easier for everyone concerned if you put this through a dedicated bank account.

No - that wouldn't solve the problem.

All four landlords would need dedicated bank accounts receiving a quarter of the rent.

Somewhere in the recesses of what's left of my mind, was there not some mention by several of the eminent course lecturers that, for jointly owned property, there'd need to be a deemed partnership set up to account for the income under MTD?

This would be back in 2016 when it was all expected that this shenanigans was to go full steam ahead in 2018.

Now, I'm not saying this is going to happen but it does solve that thorny issue of income/cost splitting. So long as partners UTRs are plumbed in correctly, it should fit into the MTD model.

After all, although an informal partnership exists by the very nature of a jointly owned investment property, it isn't that hard to see the move to formalising those in the same way (almost) every conceivable form of trust is now expected to register its existence.

Ian Blackford had it right last Wednesday when he referred to a load of 'b*llocks'. Not sure he meant MTD but he may as well have done

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Replying to the_fishmonger:
Morph
By kevinringer
08th Mar 2021 16:05

Jointly owned property (not in partnership) was covered in the 2016 consultation, the outcome is at https://www.gov.uk/government/consultations/business-income-tax-simplifi....

I had thought HMRC was going to have one taxpayer act as representative to the others but the consultation outcome is joint owners (other than spouses) of let property will each declare separately, make separate decisions about how to calculate their profits and their eligibility for the cash basis will be considered separately.

That's going to be fun for my client of 13 joint owners who own properties in different proportions. I feel an application of MTD-exemption is in the pipeline.

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Replying to North East Accountant:
Morph
By kevinringer
08th Mar 2021 09:30

North East Accountant wrote:

How's this going to work for a jointly owned property owned by 4 people?

We have a family that owns numerous properties between 13 different individuals. The properties are owned in different proportions and all rent is paid into a single bank account. We prepare annual accounts apportioning rental income and expenses between the different ownerships then calculate how much income each family member is entitled to at the end of the year. Some of the family members are non-residents. This one is going to be fun.
Thanks (1)
Replying to davidross:
avatar
By johnjenkins
08th Mar 2021 09:24

David, although you don't realise it, you have highlighted the problem and why MTD for the self-employed doing quarterly updates will not work.
Your thought processes show that you are in the world of medium to high tech. Many self-employed and Accountants are in the low tech bracket. I consider digitised records on a quarterly update for those not registered for VAT, medium tech. Maybe not for Accountants but certainly for the self-employed. This means added work for the Accountant and extra costs for the client. So this will hit the low earners dramatically.
So where we have ideals, they don't tend to work. USSR - dismantled. The EU's ideal for one country- won't happen. Nicola Sturgeon's ideal for independence - won't happen. Of course HMRC's ideal to have no tax returns and the best digital system in the world - won't happen. Ideals have to be based on sound judgement, common sense and flexibility.

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Replying to davidross:
avatar
By BryanS1958
08th Mar 2021 17:40

Try getting clients to do that. Your clients must be more compliant than mine.

And you have to hook up every 90 days, due to even more farcical banking regs - most of my clients forget (despite reminders) and then we have to mess around uploading csv files because transactions over 90 days old are often not uploaded.

I'm not exactly short of work and MTD is, in my view, completely pointless and unnecessary. HMRC will not have resources to make use of the billions of transactions.

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Morph
By kevinringer
08th Mar 2021 10:06

Does anyone know HMRC's reason for the £10,000 turnover limit? When HMRC introduced MTD for VAT the mandated turnover threshold was (and still is) £85,000 (though it will be changed next year). That meant MTD VAT only caught proper businesses. But we have loads of part-time almost hobby businesses, and small landlords, with turnover just over £10,000. It is odd that sole traders and partnerships can currently submit a 3-line account for SA if their turnover is <£85,000, but they'll have to comply with full MTD.

Thanks (1)
Replying to kevinringer:
RLI
By lionofludesch
08th Mar 2021 13:22

kevinringer wrote:

Does anyone know HMRC's reason for the £10,000 turnover limit?

Probably watched the Quickbooks adverts and realised how easy it was.

Thanks (1)

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