HMRC urged to rethink corporation tax reporting plan

Making Tax Digital for Corporation Tax (MTD for CT) is part of HMRC’s plan to have a fully digital tax system that works closer to real time. It will apply to all companies within the charge to corporation tax (except for a handful of cases which will be exempted) and will require companies to use software to keep digital records and provide quarterly electronic updates to HMRC directly from a business’ digital records. HMRC believe that MTD for CT will reduce error, ensure companies pay the right amount of tax and improve productivity, but the ATT is concerned that this might be an optimistic view of the probability of meeting these target.

ATT President Jeremy Coker said:

“We are calling on HMRC to consider refocusing their plan for Making Tax Digital for Corporation Tax.

“Practically, complexity of corporation tax will make bringing it into Making Tax Digital difficult to achieve. We do not believe that the benefits in relation to corporation tax will be as extensive as HMRC anticipate. It is unclear how imposing extra reporting requirements on entities that are already keeping digital records and making quarterly reports to HMRC under MTD for VAT¹ will increase their productivity or reduce errors.

“It appears that the main benefits of Making Tax Digital for Corporation Tax, both in terms of reducing errors and increasing productivity, are likely to come from encouraging the timely keeping of digital records by those businesses not already doing so. We would therefore recommend that HMRC focus their efforts on those businesses and consider excluding entities which are already meeting their quarterly Making Tax Digital for VAT obligations from the scope of Making Tax Digital for Corporation tax.”

In a submission to HMRC,² ATT also states it would like to see a clear commitment from HMRC to keep the proposed timeline for MTD for CT³ under review and to update or extend it as needed. This flexibility is needed at a time when businesses are recovering from the impact of the COVID-19 pandemic, and should take account of any delays in HMRC beginning a pilot of MTD for CT or a lack of availability of software for businesses to use to comply with MTD for CT.

HMRC’s most recent consultation document on MTD for CT estimates approximately 85 per cent of entities within the charge to corporation tax rely on agents to help fulfil their tax obligations.

Jeremy Coker said:

“HMRC’s recent consultation on this proposal unfortunately has little to say on the role of agents in the successful roll-out of Making Tax Digital for Corporation Tax. We encourage HMRC to ensure that agents are given a level of focus in the development of Making Tax Digital for Corporation Tax in line with the significance of their role. “

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Notes for editors

1. VAT-registered businesses with a taxable turnover of more than £85,000 already file quarterly VAT reports to HMRC digitally under the tax authority’s existing Making Tax Digital for VAT (MTD for VAT) programme.
2. HMRC’s plan is to commence a voluntary pilot for MTD for CT in April 2024. In April 2026, businesses will be mandated to use MTD for CT.