Charities - Making Tax Digital for corporation tax.

Article | | 27th January 2021

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On 12 November 2020 HMRC launched a consultation paper on the design of a new Making Tax Digital system for corporation tax. 

The government started its journey towards Making Tax Digital in 2016 when it published the consultation “Bringing business tax into the digital age.’ The Finance Act (no2) Act 2017 provided the framework for Making Tax Digital for Income Tax and VAT and Making Tax Digital for VAT was made mandatory for most registered businesses with a taxable turnover above the threshold of £85,000 from 1 April 2019. Since then HMRC has set out a road map to ensure that Making Tax Digital will apply to all VAT registered businesses from April 2022, and to businesses and landlords, liable to income tax, with property income over £10,000 per annum from April 2023. Corporation tax is the next step in its roll out of Making Tax Digital.

The application of Making Tax Digital to entities within the charge to corporation tax means that they would have to:

  • Maintain their accounting records digitally;
  • Use Making Tax Digital compatible software to provide regular (quarterly) summary updates of income and expenditure to HMRC; and
  • Provide an annual corporation tax return using their Making Tax Digital compatible software.

The paper confirms that Making Tax Digital for corporation tax will not become mandatory before April 2026 with a proposed voluntary pilot period from April 2024. 

It seeks views on extending the scope of Making Tax Digital for corporation tax to all charities, CASCs and other not  for profit organisations that are within the scope of corporation tax and are required to file a company tax return; it also invites comments on how the Making Tax Digital requirements might best be tailored to work for them. The consultation closes on 5 March 2021 and HMRC is holding a number of consultation events via Microsoft Teams. The session for charities is being held on 9 February from 10:30am to 12pm. If you wish to attend, email makingtaxdigital.consultations@hmrc.gov.uk

A full copy of the consultation can be found on the government website.

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.

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