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According to the CIOT, the government’s Making Tax Digital for Corporation Tax may fail to meet its policy objectives and could potentially be costly for businesses.

Making Tax Digital for Corporation Tax (MTD for CT)will require companies to keep digital records and provide regular electronic updates to HMRC directly from their digital records, to prove that records are being kept digitally.

HMRC are expecting MTD to reduce errors, however, the Chartered Institute of Taxation (CIOT)believes that it could result in potential costs and burdens on businesses, and so in a recent submission to HMRC, it is calling on the government to:

  • Waive the quarterly reporting requirement for corporation tax where the company is in MTD for VAT.
  • Exempt more businesses either from MTD for CT altogether or at least from the obligation to submit quarterly reports to HMRC.
  • Ensure that the rules are not overly prescriptive, in order to prevent high compliance costs for no meaningful benefit.
  • Implement MTD for CT in stages, focusing on simple businesses and basic requirements first.
  • Simplify the corporation tax system before MTD for CT is introduced.
  • Adopt a ‘soft landing’ phase for the introduction of digital links as there was for MTD for VAT.

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CIOT spokesperson Tina Riches, commented, “Quarterly reporting for corporation tax should be waived where the company is already quarterly (or more frequently) reporting under MTD for VAT, as this already achieves the policy aim of more timely digital record keeping and submitting periodic data to HMRC.

“The proposal for quarterly reporting for corporation tax is likely to prove very costly and administratively burdensome for many companies to comply with, particularly large and medium-sized companies and groups, with no obvious benefits to either them or HMRC. Most of these businesses are highly likely to have been using software and keeping digital records for many years already.

“Digitalisation can give rise to benefits, but these must be compared to the costs of introducing new digital requirements just for corporation tax before new additional administrative burdens are placed on business. The complexity of large companies and groups means that MTD as currently proposed will add significant burdens for this population and will be very expensive for them to implement; yet will not fulfil the HMRC’s objective of improving compliance generally and removing errors, most of which appear in small businesses.

“It does not make sense to impose a ‘one size fits all’ solution on all businesses liable to pay corporation tax. We strongly suggest that more businesses are exempted either from MTD for Corporation Tax altogether, deferred until a later date as happened with VAT, or exempted at least from the obligation to submit quarterly reports to HMRC.”

To find out more about contracting please contact Jaime on 01442 795 100 or email jaime.thorpe@dolanaccountancy.com.

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With over 25 years experience in contractor accountancy helping thousands of contractors, freelancers and the self employed, Dolan Accountancy has the specialist skills, reputation and credibility you can trust.

Working closely with our sister company, Contractor Umbrella, it means we can offer one low cost, fixed fee package at £125 + VAT. This gives you the flexibility of using both our Limited Company Accountancy Services and our award winning Umbrella Service, for one inclusive cost.

If you’d like to find out more about how Dolan Accountancy can help you and your business, please give us a call on 01442 795 100 or email sophie.lewis@dolanaccountancy.com or jaime.thorpe@dolanaccountancy.com.

We don’t believe in tiered packages or hidden extra fees, instead we aim to give you everything you need, including:

  • Free Company Formation – This is where it all begins. Once you have decided on an available name, we will form your company free of charge (if using our accountancy services) and it will be ready for you to use in as little as three hours
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