Digital tax for companies - what’s the agenda?
Reporting under MTD for CT
Making Tax Digital for Corporation Tax (MTDfCT) involves keeping accounting and some other records in digital form using MTD-compatible software, plus making quarterly online reports of income and expenditure to HMRC. The quarterly filing dates will depend on your company’s accounting period. You’ll need to submit the figures within a month of the end of each quarter. HMRC will respond by providing quarterly estimates of your company’s corporation tax liability.
Who and when?
The plan is for MTDfCT to be mandatory from April 2026, with a pilot scheme from April 2024. It will apply to all UK companies and non-UK resident companies subject to UK CT. Even the smallest companies will have to comply, as will not-for-profit companies such as charities, community amateur sports clubs and societies within the charge to CT. There will be rare exceptions for companies that are unable to file digitally.
MTDfCT is different
MTDfCT will require an automated flow of data from your company to HMRC. While this is similar to MTD for VAT (MTDfV) there are differences. Don’t assume that because your company complies with MTDfV, you won’t need to make changes to cope with MTDfCT. For example, if you use cash accounting for VAT, the figures for CT will differ as these must be recorded on an accruals basis.
What’s new?
MTDfCT will require your income and expenditure to be grouped under headings that will differ from those you use for general bookkeeping and for MTDfV purposes. What’s more, the data must meet company law requirements.
For detailed commentary on CT tax accounting requirements, visit https://www.tips-and-advice.co.uk , Download Zone, year 21, issue 14.
Recording transactions
The minimum digital record for a transaction will be the date, amount and category of income and expenditure. The categories (yet to be decided by HMRC) are very unlikely to match those your company currently uses for accounting purposes. We know they’ll be similar to those used for MTD for income tax, but with additions such as income and gains from non-trading loan relationships, dividends, participator loans and directors’ benefits. You’ll have to keep some non-financial data digitally too: type of company; standard industry classification; property addresses; Senior Accounting Officer; breakdown of group structure.
Tip. Quarterly filing will allow HMRC to track transactions in near real time. This means you’ll need to pay special attention to compliance. HMRC will be looking closely at dividends and directors’ loan repayments, the timing of which can be critical to CT liabilities. Now is the time to ensure your procedures for declaring and recording these are up to scratch.
Year-end procedure
At the end of your company’s financial year your accountant still needs to make the usual adjustments to convert accounting profit or loss to that for CT purposes. The deadline for filing CT returns may be brought forward, but that’s not been decided yet.
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