Making Tax Digital for corporation tax scrapped

By Anna Jordan on Small Business UK – Advice and Ideas for UK Small Businesses and SMEs

The government has confirmed that Making Tax Digital (MTD) will be scrapped for corporation tax (CT).

It was revealed in passing in HMRC’s Transformation Roadmap. Within the document, it states:

‘HMRC do not intend to introduce MTD for CT but are developing an approach to the future administration of CT that is suited to the varying needs of the diverse CT population.’

It remains to be seen what this means for how corporation tax processes will develop. What we do know is that it will begin with ‘the renewal of existing internal systems’ for corporation tax to make way for future innovations.

Andrew Tall, partner at HW Fisher, goes into more detail: “One aspect of the ongoing digitalisation effort involves discussions between HMRC and key stakeholders around the format of CT computations, with HMRC highlighting the need for standardisation and improved disclosure.

“Future areas of the project are expected to significantly expand mandatory disclosure in elements that are currently not consistently disclosed, such as the presence and content of a detailed profit and loss account, the expenses therein that are analysed, and the level of detail of such disclosure,” he said.

It could mean more complications in reporting corporation tax than there would have been with Making Tax Digital, according to Tall: “The discussions around the format of CT computations could lead to significantly greater changes in how some users prepare their tax computations than those proposed under MTD for CT, as they will require the creation of supporting analysis documents and a deeper level of analysis.”

Why have HMRC decided to do away with MTD for CT?

One of the main reasons for doing this is to build an alternative system that accommodates the diversity of the businesses that pay corporation tax in the UK.

It comes as little surprise to experts as it’s been almost five years since the government last consulted on extending Making Tax Digital to corporation tax. Adam Craggs, head of tax, investigations and financial crime at RPC pointed out that, “The initiative had faced significant technical and practical challenges, and the compliance burden on smaller companies was always disproportionate to the likely benefits.” 

Contrary to HMRC’s messaging, Craggs doesn’t believe that Making Tax Digital has been as effective as the tax body had hoped. “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. 

“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.”

What else has HMRC announced for small businesses?

The roadmap specifically aims to improve digital services for small businesses, with a section of the roadmap dedicated to them. Broadly speaking, HMRC want to make it as ‘easy and low-burden as possible’ to interact with them.

First up, education. In 2025-2026, HMRC will develop education packages specifically geared at small businesses, plus Tax Facts modules for students in higher education to support future entrepreneurship.

As well as Making Tax Digital for income tax (to be introduced in April 2026), e-invoicing will be used to minimise error and lower small business tax administration. The document suggests that introducing e-invoicing into a business can cut late payments by 20 per cent, based on research from Sage.

The taxman wants to introduce higher standards for intermediaries, too. More officers and third-party data along with increased analytical abilities to tackle non-compliance will also be introduced.

Key takeaways

• MTD for CT will not go ahead, but will start with the ‘renewal of existing internal systems’
• One of the main reasons for doing this is to build an alternative system that accommodates the diversity of the businesses that pay corporation tax in the UK.
• Reporting CT in future could involve disclosing elements of your business that aren’t necessarily required now, such as profit and loss.
• The Roadmap document includes a series of other measures geared at small business owners, such as the introduction of e-invoicing.

Read more

Where to start with Making Tax Digital for Income Tax – MTD for Income Tax starts in April 2026. Learn about the requirements and discover what you have to do to get ready in time

5 things you need to know about MTD for Income Tax – Unsure what Making Tax Digital for Income Tax means for your small business? These tips clarify the most important bits you need to know

7 ways to reduce your corporation tax bill – All limited companies must pay corporation tax on the profits they make, but there are entirely legitimate ways to reduce the amount you pay says James Johnson, a partner at Hillier Hopkins

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