As HMRC dropped its ‘transformation roadmap’ last week a small section of the lengthy document confirmed Making Tax Digital (MTD) for Corporation Tax has been canned

Instead HMRC said it was ‘developing an approach to the future administration of corporation tax that is suited to the varying needs of the diverse corporation tax population’.

 

Nothing more is added to describe the population other than it ‘includes a very wide range of entities’, referencing small business, multinationals, charities and property management businesses.

 

MTD for Income Tax is still due to go ahead from April 2026 for those earning over £50,000 working as self employed, sole traders and landlords.

 

Adam Craggs, head of tax, investigations and financial crime at RPC said: ‘HMRC’s decision to scrap MTD for Corporation Tax is not entirely unexpected. The initiative had faced significant technical and practical challenges, and the compliance burden on smaller companies was always going to be disproportionate to the likely benefits.

 

‘While some had hoped MTD would improve efficiency and help close parts of the tax gap, the potential revenue upside was always uncertain and this move avoids the far greater risk of investing in a one-size-fits-all system that would not have served the full range of UK corporates effectively. In that sense, the decision can be seen as a pragmatic one by HMRC.’

 

HMRC has not been clear about what it intends to do instead of rolling out MTD for Corporation Tax. However, HMRC did say it will ‘work with stakeholders to identify change that will provide the best outcomes for taxpayers and government’, while adding that it is ‘committed to consulting and providing early clarity an assurance on both the design and timing of changes’.

 

Craggs offered some advice on this, saying: ‘Looking ahead, the government should focus more on targeted digital measures in areas of high risk and known non-compliance, rather than sweeping mandates.

 

‘It also needs to strengthen HMRC’s dispute resolution capacity as digital reform without accessible support for taxpayers can quickly escalate into avoidable enforcement issues and litigation.’

 

This outcome was ‘always likely’ after HMRC never set a clear date for when it was to be rolled out, despite announcing MTD for Corporation Tax as long as 2015.

 

With the government’s growth agenda and mission to slash red tape and regulation for businesses, it is not surprising that HMRC was forced to drop the plans.

 

Many will be relieved that this decision avoids adding yet another layer of compliance.

 

‘Corporation tax affects everything from micro-entities to multinational groups. Forcing a uniform process could have resulted in unintended pressure points for businesses that don’t fit the mould.’

 

Despite the decision not to go ahead with MTD for Corporation Tax, we do not believe it will stall automation in accountancy as ‘automation is progressing regardless of HMRC’s position on MTD’.

 

Others are saying how MTD for corporation tax would have been difficult and any benefits of implementing it would mostly likely not be as ‘extensive as anticipated’, said Jon Stride, chair of ATT’s technical steering group.

 

Stride added: ‘It is not clear how imposing extra reporting requirements on entities that were already keeping digital records would have increased their productivity, or reduced errors.’