Charities - Making Tax Digital for corporation tax.

Article | Judith Pederzolli | 27th July 2023

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Updated: 27 July 2023.

The Government started its journey towards Making Tax Digital (MTD) in 2016, when it published the consultation ‘Bringing business tax into the digital age’.

MTD for VAT was made mandatory from 1 April 2019 for VAT registered business with taxable turnover greater than £85,000, and was extended to all VAT registered businesses from 1 April 2022. The plan at the time was that this would be followed by MTD for Income Tax Self-Assessment (MTD ITSA), being mandated from 6 April 2024 for unincorporated business and landlords with turnover greater than £10,000, and MTD for Corporation Tax (MTD CT), being mandated from April 2026. The last Government consultation on MTD CT, published in November 2021, reiterated this timeline.

It has always been intended that the rollout out of MTD CT would follow the rollout of MTD ITSA, with HMRC stating in their last consultation that the Government is keen to ensure that any the lessons learnt from the rollout of MTD VAT and MTD ITSA are considered in any future MTD CT design. However, MTD ITSA has since been pushed back two years to 6 April 2026, with the turnover threshold being increased to £50,000 from 6 April 2026 and £30,000 from 6 April 2027 (although the later threshold still being subject to review).

This has left great deal of uncertainty as to when MTD CT will finally go live, and the form that it will ultimately take beyond the key features which will require entities within the charge to corporation tax to:

  • Maintain their accounting records digitally;
  • Use MTD compatible software to provide quarterly updates of income and expenditure to HMRC; and
  • Provide an annual corporation tax return using their MTD compatible software.

As to when the roll out of MTD CT will finally go ahead we can but speculate, however, it is now highly likely that MTD CT will not be mandatory from April 2026 as originally planned. The only thing that is certain is that further guidance from HMRC would be most welcome given the recent setbacks we have seen to the rollout of MTD.

If you would like to know more about any of the points raised in this article or have another issue you would like to discuss, please contact us or speak to your usual PEM adviser.
Written by Luke Bacon, Assistant Manager.

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