On 12 November 2020, HMRC launched a consultation document to analyse how the systems placed for Making Tax Digital (MTD) and already publicly in use for VAT could be implemented for Corporation Tax (CT). Many fundamental changes are being sought by HMRC so corporates must engage in the consultation either directly or through interested parties such as FTI Consulting.

Companies need to maintain their records digitally and submit quarterly updates as well as year-end tax return using MTD compatible software.

All the VAT-registered businesses with a taxable turnover above the VAT threshold is currently encompassed by the Making Tax Digital (MTD) regime which is launched in 2018 and from April 2022, it will be extended to all VAT-registered businesses below the threshold. 

For those who receive income from self-employment and/or property, MTD will be mandated for income tax for them from April 2023 and to cover the corporation tax, it is proposed that the regime will be expanded further. The companies will be able to participate in a voluntary pilot in 2024 as suggested by the current timelines. 

Important Points to Remember About MTD for CT:

A long-awaited consultation on MTD for Corporation Tax was launched in November and over the next two months, HMRC is hosting online meetings with groups of stakeholders to gather feedback on the proposals.

In November, consultation on MTD for Corporation Tax was launched and HMRC hosted an online meeting with stakeholders to collect their feedback on the proposals.

Key Points for Businesses to Know About MTD for CT:

• The income and expense summaries will be uploaded quarterly using software and in regards to VAT requirements, companies will maintain digital records in line with it.
• As the year progresses, the expected corporation tax liability will be displayed.
• The software will add iXBRL tags automatically.
• Before filing the accounts with Companies House and the tax return with HMRC, the company’s accountant will make accounting adjustments using MTD software at the year-end.
• The MTD for Companies House, filing deadlines and corporation tax might be aligned as per the suggestion.
• There is a possibility of discontinuing Tax Online software product and the free Company Accounts and commercial software will fill this space as anticipated by HMRC.
• To align taxable and accounting profits more closely, the consultation makes several references to the work of the Office of Tax Simplification on possible simplifications to the corporation tax computation.
• MTD will be applicable to all entities within the charge to corporation tax, including clubs, non-resident companies and non-exempt public bodies.
• For the largest companies with profits exceeding £20m, the MTD for CT rules will be modified and these companies are already making CT payments through the quarterly instalment payments regime. 
• Out of 2.8m corporation tax population, 1.1m have a turnover above the VAT threshold because of which they will be within the scope of the MTD for VAT rules

The new ways will be adopted for working in spreadsheets, financial systems and tax products and all the data must be digitally linked that goes into the tax calculation and return. 

The tax faculty is keen to provide feedback from members and throughout the development of MTD for corporation tax, will be actively engaging with HMRC. For any query feel free to contact us on Dhruv@doshioutsourcing.com