Following the release of its updated ‘transformation roadmap’ last week, HMRC has officially confirmed that the Making Tax Digital (MTD) initiative for Corporation Tax will no longer proceed.
Instead, the department announced it is crafting a new strategy for managing Corporation Tax that better reflects the diverse nature of the entities within its scope. While no specifics were provided, HMRC acknowledged this population spans from small businesses and multinational corporations to charities and property management firms.
The MTD scheme for Income Tax remains scheduled to launch in April 2026 for self-employed individuals, sole traders, and landlords with earnings over £50,000.
Expert Reactions
Adam Craggs, head of tax, investigations, and financial crime at RPC, noted that this move was foreseeable. He explained that the proposed digital overhaul faced notable practical and technical barriers. The added compliance requirements, especially for smaller firms, often outweighed the potential benefits.
Craggs stated, “Though MTD was expected to streamline processes and potentially reduce the tax gap, the real financial gains were uncertain. This decision reflects a more realistic approach, avoiding the pitfalls of a universal system that may not meet the varied needs of UK companies.”
While HMRC has yet to outline a clear alternative, it emphasized a commitment to working collaboratively with stakeholders to develop improvements that serve both taxpayers and the government. It also pledged transparency regarding any future changes, including clear timelines and design structures.
Craggs advised that future reforms should be more selective, focusing on high-risk areas and known cases of non-compliance. He also stressed the need to enhance HMRC’s dispute resolution capabilities, cautioning that digital reforms lacking robust taxpayer support could lead to increased enforcement and litigation.
Lack of Clarity Doomed the Project
Nimesh Patel, tax partner at Grunberg, remarked that the abandonment of MTD for Corporation Tax was predictable, especially since HMRC never provided a concrete launch timeline, despite originally announcing the initiative back in 2015.
With the government prioritizing economic growth and the reduction of bureaucratic hurdles for businesses, this cancellation aligns with broader policy trends. Patel added that many businesses would welcome the decision, as it spares them from additional compliance responsibilities.
“Corporation Tax affects a wide spectrum of entities—from micro-businesses to global enterprises. Imposing a standardized digital framework could have introduced unnecessary complexity for firms that don’t conform to the typical model,” Patel explained.
He also pointed out that the decision wouldn’t hinder the ongoing trend of automation within the accounting sector. “Automation is advancing independently of HMRC’s MTD stance,” he noted.
Skepticism Over MTD’s Value
Jon Stride, chair of the ATT’s technical steering group, echoed these sentiments. He emphasized that the practical benefits of rolling out MTD for Corporation Tax likely wouldn’t have matched expectations.
“It’s unclear how requiring more digital submissions from companies already using digital tools would have improved efficiency or minimized errors,” Stride commented.
