HM Treasury have opened a new consultation 'Making Tax Digital for Corporation Tax' inviting views on how the principles of Making Tax Digital (MTD) could be implemented for Corporation Tax.

Background to MTD

  • The government published its consultation ‘Bringing business tax into the digital age’ in August 2016 with Finance (No 2) Act 2017 introducing the framework for MTD for Income Tax and VAT.
  • From 1 April 2019, MTD for VAT became compulsory for most VAT registered businesses with a taxable turnover above the VAT registration threshold.
  • From April 2022, MTD for VAT will apply to all VAT-registered businesses (including those below the VAT registration threshold).
  • From April 2023, MTD for Income Tax will apply for non-corporate businesses and landlords income over £10,000 per annum regardless of VAT status. This will involve quarterly reporting to HMRC.

Consultation

This consultation document will lead the way for the introduction of MTD for entities subject to Corporation Tax (CT). The aim of the consultation is to get a better understanding of the transitional and ongoing costs and benefits for companies of different sizes.

The aim of MTD is:

  • Reduction of administration.
  • Increased productivity for businesses.
  • Seamless interaction with HMRC.
  • Reduction of errors.
  • Real-time assessment of the economy.

There is a proposed date for a voluntary pilot of MTD for Corporation Tax of April 2024 and no mandated use will be implemented before April 2026.

The consultation closes on 5 March 2021.

Consultation questions

  1. Do you think there are any reasons why an entity within the charge to CT (or a sum assessable as though it were CT), should not fall within the overarching scope of MTD?
  2. Do you agree that all entities should be required to record the date, amount and category for all transactions within MTD compatible software?
  3. Would group companies value the ability to keep digital records at group level? Are there any additional benefits to utilising a mixed approach?
  4. Do you agree with the minimum categorisation for MTD compatible software, as suggested above?
  5. Are there further categories or alternative approaches to the categorisation of records within MTD compatible software that you consider would be appropriate?
  6. Would group companies value the ability to provide regular updates through a nominated company? Please provide details of any increased or reduced administrative burdens or costs that could result from this.
  7. Do you foresee any constraints to providing updates at group level and how do you think these could be addressed?
  8. Which forms and processes around incentives, allowances and reliefs would you most like to see digitised? Please provide details of the guidance and/or tailored assistance that would help this process.
  9. What practical benefits do you think could result from standardising how entities submit claims and elections through software? Please provide details of any increased or reduced administrative burdens or costs that could result from this.
  10. Do you agree that an entity’s update cycle should be based upon its expected accounting period with updates due one month after each quarter-end?
  11. Do you agree with the principles for very large companies within the Quarterly Instalment Payments (QIPs) regime?
  12. Do you consider that any of these other scenarios require a different approach to the process of updating HMRC? If so, please provide details of any barriers and how these could be addressed within the overall approach outlined in this chapter.

Responses should be sent to: This email address is being protected from spambots. You need JavaScript enabled to view it.

Useful guides on this topic

Compliance review: Returns, filing & payments
An overview of the existing compliance for Corporation Tax.

Eight things I wish I had known about Making Tax Digital for VAT
A review of some of the issues that arose at during the implementation of MTD for VAT.

External link

Consultation: Making Tax Digital for Corporation Tax

 

 

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