HMRC has announced that it is abandoning its plans for Making Tax Digital for Corporation Tax (MTD for CT). The news came in the tax authority’s recent Transformation Roadmap. The focus is now on ensuring that any future administration of CT is well suited “to the varying needs of the diverse CT population”. Clearly the realisation that Corporation Tax affects business large and small – from start-ups to multinationals – and across many different sectors meant that a blanket approach was felt to be inappropriate.
Slow progress
Progress on MTD for Corporation Tax has been notably slow, with little in the way of recent activity. Attention has instead been focused on the rollout of MTD for Income Tax (MTD IT) which is scheduled to kick in from April 2026 for individuals with income over £50,000. The only real confirmation made by the Government was that MTD for CT would not be introduced before the 2026/27 tax year. Ongoing delays to the Making Tax Digital roadmap meant the focus on Corporation Tax was put on the back burner with no real announcements in the past few years. So whilst this news isn’t a surprise it’s a far cry from the original plans for the digital project.
What was Making Tax Digital for Corporation Tax?
The inclusion of Corporation Tax in the original MTD plans suggested that organisations paying Corporation Tax would have had to maintain digital record-keeping, quarterly summary updates and submit an annual corporation tax return using compatible commercial software. However, many businesses now keep detailed digital records and so it was becoming increasingly unclear how these plans would have boosted productivity or reduced errors.
Extra compliance
This announcement does allow attention to turn to other compliance issues, including the need for small businesses to file their profit and loss accounts with Companies House. This is scheduled to be going ahead from April 2027. But there is some uncertainty here too and a recent statement from the Department for Business has confirmed that the Government is committed to “avoiding undue burdens” on companies. As a result more individuals may choose to incorporate to avoid Making Tax Digital for IT.
What else could be introduced?
It’s likely that Corporation Tax will still be under the microscope, especially given that the tax gap for this liability has grown significantly. It now accounts for 40% of the total tax gap, rising from 6.4% in 2011/12 to 15.8% in 2023/24. The focus is now likely to be on modernising the system and recognising the breadth of companies which pay Corporation Tax. A one size fits all approach is no longer relevant, or helpful.
To discuss any aspect of the Making Tax Digital rules, and how it could affect you please get in touch.