This article explains how disallowable expenses are handled in MTD IT, what can be changed in Capium, and what must be corrected at source.
What Is a Disallowable Expense?
A disallowable expense is a cost that:
May appear in bookkeeping
But is not allowable for tax purposes
Examples include:
Personal use elements
Non-deductible fines or penalties
Certain capital or private expenses
How Disallowable Expenses Are Identified
Disallowable status may be:
Suggested automatically based on the chart of accounts
Imported from Bookkeeping or Capium 365
Added manually by the accountant during review
Can I Change Disallowable Status in MTD IT?
Yes — with an important caveat.
What You Can Do
Mark an expense as allowable or disallowable within MTD IT
This affects what is reported to HMRC
What You Cannot Do
Changes made in MTD IT do not automatically sync back
Bookkeeping and Capium 365 are not updated by this change
Best Practice (Strongly Recommended)
If you mark an expense as disallowable in MTD IT:
Submit the MTD IT update as required
Go back to the source system (Bookkeeping or 365)
Correct the transaction there to match the tax treatment
This ensures:
Records remain aligned
Future submissions are consistent
No reconciliation issues later in the year
Important Reminder
MTD IT is a reporting layer, not the master record.
Capium allows flexibility to meet deadlines, but professional judgement and source-data accuracy remain the accountant’s responsibility.