Making Tax Digital for Corporation Tax

The technical team are always interested in receiving feedback from members on all aspects of MTD for corporation tax and hearing about their practical experiences. Please email your information to us.

Please use the menu below to access the latest information on MTD for corporation tax.

Latest News

Making Tax Digital for corporation tax – HMRC consultation response

On 30 November 2021 HMRC published a response to their earlier consultation on the potential design of Making Tax Digital (MTD) for corporation tax.  The consultation considered a number of areas, including the scope of MTD for corporation tax, digital record keeping, filing updates, establishing the final corporation tax liability and special cases and exemptions.  

The ATT's response can be found here.

The consultation response states that the Government is committed to ongoing collaboration with stakeholders to help shape a service design that works for all and will provide sufficient notice ahead of implementation following any decision to mandate MTD for CT, to allow businesses time to prepare.

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Timetable for MTD for corporation tax

HMRC have stated that MTD for corporation tax will not be mandated before April 2026.

The MTD for corporation tax consultation suggests that a pilot of the service could be launched in 2024.

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What is MTD for corporation tax?

Under the requirements of MTD for corporation tax, companies will need to:

  • maintain digital records of their income and expenditure;
  • provide quarterly updates of income and expenditure to HMRC using MTD compatible software; and
  • file their annual corporation tax return using MTD compatible software.

Digital record keeping

The consultation on MTD for corporation tax proposes that companies will need to keep a digital record of all transactions they undertake. For each transaction, the date and amount will have to be recorded and a category assigned. 

In addition to this transactional data, it is proposed that the digital records will also need to include some non-financial data, such as company type, industry classification, addresses of properties and a group structure, with entities in the charge to corporation tax clearly identified.

Quarterly updates

Under MTD companies will be required to submit a quarterly update to HMRC using compatible software.

HMRC envision that software will be able to prepare these quarterly updates from the digital records kept by the company.  It will be up to the company to decide whether their quarterly updates include any accounting or tax adjustments, or are just summaries of the income and expense transaction figures for the quarter.

Final return

Companies will need to use MTD-compliant software to calculate and submit their normal end of year corporation tax return.  This doesn’t have to be the same piece of software used to keep digital records, but where it isn’t ‘digital links’ will need to be put in place between the different pieces of software used -  it won’t be possible to manually type in or copy and paste totals from one programme to the other. 

One area explored in the MTD for corporation tax consultation is whether there is scope to align the corporation tax return filing deadline with that for the statutory accounts.  This would mean that private companies would only have nine months to file their corporation tax return (six months for a listed company). The consultation response indicates that, whilst there are no plans to change legislation to require all companies to file their company tax returns with HMRC at the same time as they file their statutory accounts with Companies House, the introduction of MTD for CT could bring an opportunity to revisit and simplify existing processes.

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Scope of MTD for corporation tax

The MTD for corporation tax consultation proposes that MTD will apply to all entities within the charge to corporation tax, with only a few minor exceptions. 

Unlike MTD for income tax self-assessment (and MTD for VAT to date) there is no exemption proposed for smaller businesses.  Instead, the only true exemptions proposed are for the digitally excluded (i.e. those for whom it’s not ‘reasonably practicable’ to use digital tools to keep records and file updates) and insolvent entities which would normally be exempt from online filing.

However, it is proposed that the requirements could be relaxed or flexed for companies in certain circumstances.  In particular, those companies that fall in the quarterly instalment payments regime for very large companies (i.e. with profits in excess of £20m) may not be required to submit quarterly reports, though they will still be required to keep digital records in the required format and submit their annual return using MTD compatible software.

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Further information and guidance

We will add links here to further HMRC guidance and resources as they become available.

Tolley's Tax Technology Horizon report provides a deep dive into the key issues that digitalisation presents to businesses and tax advisors, including:

  • What tax technology tools are available, and how are they being employed?
  • What opportunities and challenges does tax technology present for the future?
  • How is technology changing the skill sets required within tax practices?

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