HMRC has confirmed that it will not be implementing Making Tax Digital for Corporation Tax (MTD for CT) as part of its broader digital transformation plans. This announcement draws a line under years of speculation and delay regarding the rollout of MTD requirements to limited companies.

Why Has HMRC Made This Decision?

Originally, MTD for CT was intended to require companies to maintain digital records, file quarterly updates, and submit annual returns via compatible software.

Progress on this front has been slow, with HMRC’s focus shifted instead to launching MTD for Income Tax (MTD IT). The continued delays and complexity of corporation tax, especially compared to other tax types, meant that MTD for CT fell down the priority list and has now been officially abandoned.

HMRC has acknowledged in its transformation roadmap that the corporation tax population is diverse, spanning small businesses, multinationals, charities, property management companies, and unincorporated associations. A one-size-fits-all digital approach was never going to be straightforward, and feedback from tax professionals and organisations reflected concerns about the practical benefits for smaller companies.

What Does This Mean for Limited Companies?

• No mandatory switch to digital record-keeping and quarterly updates for corporation tax, at least as currently planned.
• Businesses can continue using their existing systems for corporation tax compliance.
• HMRC will continue digital transformation, but with a new approach tailored to the varied needs of corporation tax payers.

What Happens Next?

While MTD for CT has been cancelled, HMRC will still pursue modernisation and compliance improvements for corporation tax. The latest digital transformation roadmap outlines a broader ambition to create a digital-first tax system by 2030, incorporating measures such as data-driven nudges and digital service enhancements. There will evidently be continued developments in how HMRC collects and uses data to help businesses get their tax affairs right, but not through the scrapped MTD for CT regime.

It’s also important to note that other compliance changes are still in play.

For example, the requirement for small companies and micro-entities to file a profit and loss account with Companies House is set to commence from April 2027, though recent ministerial statements cast some doubt on whether this will actually go ahead as currently planned.

Our View…

We’re pleased and relieved that HMRC are going to take a more proportionate and tailored approach, especially given that many small businesses are already using digital tools, and the benefits of the stricter digital reporting for all limited companies were never clear. It felt like yet another layer of reporting for little return to us, so it’s relief that it’s fallen away.

As always, we’ll continue to keep you informed about any further changes that might impact your business and guide you through your tax compliance requirements. If you have questions about what these changes mean for your company, or need personalised advice on digital tax, please get in touch. We’re here to help!