Making Tax Digital for Corporation Tax

The Government is developing policy by focusing on modernising the tax system, through its Making Tax Digital (MTD) programme.

The first mandatory stage of this began with VAT-registered businesses with a turnover above £85,000 from April 2019, and it’s now set to rollout to certain self-assessment taxpayers in 2023, then eventually to corporation tax by as early as 2026.

Essentially, the scheme will require all companies or other entities within the charge to corporation tax to maintain digital records, and use MTD-compatible software to provide quarterly summary updates of their income and expenditure to HMRC.

They’ll then need to use their MTD-compatible software to submit an annual corporation tax return.

By extending MTD to more taxpayers and businesses, HMRC said it aims to improve productivity by encouraging the use of record-keeping tools and linked IT systems, as well as building resilience in the tax system.

The Institute of Chartered Accountants in England and Wales argued, however, that HMRC should reconsider the requirement for quarterly returns, saying this would create an additional burden for businesses, while offering “very little” information about the company’s accounting or tax position.

It recommended postponing the requirement “until digital record-keeping has become established and the software available is shown to work efficiently for companies and HMRC”.

A consultation looking in more detail at how the scheme might be implemented closed last month.

This asked businesses and other stakeholders’ views on details such as which entities will be in scope, which business records will need to be kept digitally, and how the new system might align with current reporting requirements for companies.

Depending on the responses, a voluntary pilot for the scheme could be launched in April 2024, before it’s rolled out on a mandatory basis from April 2026.

For further information on MTD for Corporation Tax, please contact Andrew Kershaw on 023 8046 1245.