UK and International Tax news
MTD And Corporation Tax
Friday 13th November 2020
HMRC has issued a consultation document which explores how the principles established for Making Tax Digital could be implemented for Corporation Tax.
In the Chancellor’s March 2020 Budget, he highlighted the government’s intention to create ‘a tax system fit for the challenges and opportunities of the 21st century’. In July 2020 the Government issued its ten-year road map strategy which proposed the extension of Making Tax Digital in the period to 2030 to digital reporting, tax payments and tax administration. In particular it proposed:
- from April, 2022 MTD to apply to all VAT-registered businesses for their VAT obligations;
- from April 2023, businesses and landlords with business income over £10,000 per annum which are liable to income tax will need to keep digital records and use software to update HMRC quarterly through MTD;
- for MTD to apply to those businesses that have incorporated to become companies, with consutation later in the year on the design of what the system should look like for Corporation Tax.
HMRC is now consulting with stakeholders on the design of MTD for Corporation Tax and to provide businesses with as much time as possible to prepare for the proposed changes. The consultation also seeks feedback on the transitional and ongoing costs and benefits for companies of different sizes.
If the principles and design proposed in the consultation are adopted, entities within the charge to CT will need tomaintain their records of income and expenditure digitally, use MTD compatible software to provide regular/quarterly summary updates of their income and expenditure to HMRC, and provide an annual CT return using their MTD compatible software.
HMRC will also publish a simplified version of the consultation aimed at small companies, which may need to transition to MTD compatible accounting software, but do not need to digest and respond to the full material in the consultation.
After the consultation, the government will analyse the consultation responses and publish its response. There will then be a process of refinement of the MTD for CT requirements through collaboration with stakeholders. It is proposed that entities will be given an opportunity to take part in a pilot for MTD for CT. The government will not mandate MTD for CT prior to 2026.
The consultation will run for 16 weeks to 5 March 2021.Contact Us