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10 things you need to know about MTD for CT

4 January 2021: As HMRC begins gathering feedback from stakeholders on the potential expansion of the Making Tax Digital regime to corporation tax, ICAEW’s Tax Faculty outline the key things that businesses and agents need to consider.

Launched in 2018, the Making Tax Digital (MTD) regime currently encompasses all VAT-registered businesses with a taxable turnover above the VAT threshold and will be extended to all VAT-registered businesses below the threshold from April 2022.

From April 2023 MTD will be mandated for income tax for those that receive income from self-employment and/or property, and it is proposed that the regime expands further to cover corporation tax. Current timelines suggest that companies will be able to participate in a voluntary pilot in 2024, with mandation in 2026 at the earliest.

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.

At this stage of the process while there are few details of what the scheme will look like, the Tax Faculty’s Anita Monteith has outlined the key things that every business potentially impacted should be considering. They are:

  1. Companies will maintain digital records in line with the VAT requirements, with income and expense summaries uploaded quarterly using software.
  2. The expected corporation tax liability will be displayed as the year progresses.
  3. At the year end, the company’s accountant or agent will make accounting adjustments before filing the accounts with Companies House and the tax return with HMRC using MTD software. 
  4. The iXBRL tags will be added automatically by the software.
  5. The corporation tax population is currently 2.8m. Of these, 1.1m have turnover above the VAT threshold so will already be within scope of the MTD for VAT rules. Will their current IT solution cover corporation tax too?
  6. The MTD for CT rules will be modified for the largest companies with profits exceeding £20m who are already making CT payments through the quarterly instalment payments regime. 
  7. Overall, MTD will apply to all entities within the charge to corporation tax, including clubs, non-resident companies and non-exempt public bodies.
  8. The consultation makes several references to the work of the Office of Tax Simplification on possible simplifications to the corporation tax computation to align taxable and accounting profits more closely. 
  9. The free Company Accounts and Tax Online software product used by 8% of companies may be discontinued. HMRC anticipates that commercial software will fill this space.
  10. There is a suggestion that the MTD for corporation tax and Companies House filing deadlines might be aligned.

The Tax Faculty will be actively engaging with HMRC throughout the development of MTD for corporation tax and is keen to provide feedback from members. For example, the team is interested in hearing how members currently comply with iXBRL tagging requirements nearly 10 years on from its introduction; is this done automatically using software, is it outsourced or is it still done by hand?

Monteith will be joined by her colleagues Caroline Miskin, Practitioner Tax Manager and Sarah Ghaffari, from ICAEW’s Business and Management Faculty, to give a warts-and-all examination of HMRC’s proposals for MTD for corporation tax on 13 January.

The webinar is free for all Tax Faculty and Business and Management Faculty members, register to attend.