Making Tax Digital for Corporation Tax?

Budget, Corporation Tax,

The Government has published its responses to a number of consultations on tax policies announced in the Spring Budget, some of which were extended due to Covid-19, plus some draft legislation. The most notable of the consultations, as far as our clients are concerned, was around Making Tax Digital for Corporation Tax.

This would require quarterly online filing, as was recently introduced for VAT.

Having consulted with stakeholders during the latter half of this year, HMRC is now looking for feedback around their initial design, to get an indication of the costs and benefits for companies of all sizes and an understanding of the transitional implications.

There are currently approximately three million companies who would be affected by new requirements. These requirements are likely to mandatory from 2026, and to be as follows:

  1. Maintain records of income and expenditure digitally.
  2. Use Making Tax Digital compatible software to provide quarterly summary updates.
  3. Provide an annual corporation tax return using Making Tax Digital compatible software.

Quarterly reporting would be an entirely new requirement for these companies. The consultation is to look at the process and content of these quarterly reports, and how that might affect the existing accounting and tax functions.

It will also consider amending the filing deadline for Corporation Tax returns, which might bring it into line with the deadline for filing accounts, being nine months after the year end. This deadline is currently twelve months, although we usually prepare the Return alongside the accounts for efficiency.

The Department for Business, Energy and Industrial Strategy (BEIS) is to publish its own consultation containing proposals on improving the value and quality of accounts information held at Companies House.

As part of the consultation, cost will be a consideration. As mentioned above, this would be an entirely new reporting structure for businesses. New processes would be required. HMRC contends that the new reporting structure would reduce opportunities for error, and reduce the time spent on tax admin by businesses.

Our view is that HMRC are being overly optimistic as to the benefits to be gained for businesses, as we cannot foresee any for our clients.

  • The majority are already subject to Making Tax Digital for VAT, so are using digital solutions and gaining from those.
  • The recovery from both Coronavirus and Brexit are likely still to be ongoing at the planned implementation date so adding another reporting requirement for no benefit is not likely to be helpful.

As ever, we shall keep you updated on progress of the consultation, but it is very likely that quarterly reporting for Corporation Tax will become a reality in due course!

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