HMRC confirms MTD for corporation tax to be mandated from 2026

In a new consultation HMRC has confirmed that Making Tax Digital (MTD) for corporation tax (CT) (MTD for CT) will not be implemented until 2026 ‘at the earliest’.

The consultation considers how the principles created for MTD could be established for companies within the charge to CT. It outlines the potential design of the MTD for CT system and provides companies with information in regard to what may be required of them following the introduction of MTD for CT.

HMRC is seeking feedback on the plans from companies and agents.

Commenting on the consultation, Tina Riches, Chair of the joint Association of Taxation Technicians (ATT) and Chartered Institute of Taxation (CIOT) Digitalisation and Agent Services Committee, said: ‘We are disappointed that the consultation presupposes that most entities within the charge to CT should be within the scope of MTD before the costs and benefits arising to different parts of the population have been established.

‘If a key purpose of MTD is to encourage taxpayers to become digital then it is not necessary to extend it to CT, as a large proportion of companies are VAT registered and so already in MTD for VAT, or using digital records anyway.’

The consultation runs from 12 November 2020 to 5 March 2021. The details can be found here.

CIOT urges government to ensure Digital Services Tax is a ‘temporary fix’

The Chartered Institute of Taxation (CIOT) has urged the government to make its planned Digital Services Tax (DST) a ‘temporary fix’ to the issue of taxing online businesses.

The DST is set to take effect from April 2020, and will apply a 2% tax to the revenues of certain digital businesses. A double threshold will exist, meaning that businesses will have to generate revenues from in-scope business models of at least £500 million globally to become taxable under the DST.

The CIOT stated that the UK’s DST should ‘ideally last no longer than five years’. It has also called for the government to repeal the DST ‘as soon as there is a multilateral agreement’ through the Organisation for Economic Co-operation and Development (OECD) on a ‘global method’ to tax digital businesses.

‘Given the nature of the tax, a pragmatic approach will be required in order for it to be implemented effectively,’ said Glyn Fullelove, Chair of the Technical Committee at the CIOT.

‘This is because revenue taxes such as this are a blunt instrument that cannot accurately represent the tax on the profits related to user-based value on all businesses on which it is imposed. It will inevitably over-tax some companies and under-tax others.’

In regard to international developments on the matter, EU member states have so far been unable to reach an agreement on plans for an international DST.

CIOT urges government to simplify Structures and Buildings Allowance

The Chartered Institute of Taxation (CIOT) has urged the government to ‘simplify’ its new Structures and Buildings Allowance (SBA).

The SBA provides relief for expenditure on certain new, non-residential structures and buildings. Eligible construction costs incurred on or after 29 October 2018 will qualify for relief: this will be at an annual rate of 2%, on a straight-line basis. If a contract was entered into before this time, relief will not be available.

In a recent report, the CIOT stated that the current SBA rules are ‘too complex’, and that they ‘over-complicate matters for taxpayers’.

According to the CIOT, the SBA ‘creates new categories of expenditure’, which will have to be identified and tracked for tax purposes. The Institute has urged the government to remove ‘much of the detail and complexity’ from the current proposals in order to help eliminate confusion amongst taxpayers.

Commenting on the matter, John Cullinane, Tax Policy Director at the CIOT, said: ‘We urge the government to consider whether a simpler, more streamlined approach to the SBA is possible. The policy aims could have been achieved by a simpler approach of incorporating the relief for this expenditure into the existing capital allowances available.’

CIOT welcomes MTD for VAT ‘soft landing’ concession for taxpayers

The Chartered Institute of Taxation (CIOT) has welcomed the legal status given to the Making Tax Digital for VAT (MTD for VAT) ‘soft landing’ period, which is intended to help taxpayers who may find it difficult to comply with the IT demands associated with the initiative.

The MTD for VAT regulations are set to take effect from 1 April 2019, and will apply to VAT-registered businesses with a taxable turnover above the VAT registration threshold (currently £85,000).

HMRC recently published a VAT Notice which states that the Revenue will allow a ‘soft landing’ period of time for firms to ensure they have ‘digital links between all parts of their functional compatible software’ in place.

However, for the first year of mandation, businesses will not be required to create digital links between MTD for VAT software programs.

Whilst the CIOT welcomed the news, it has warned that the soft landing period will not affect how the final VAT return is filed. This must be submitted through Application Programming Interface (API)-enabled software, rather than HMRC’s current portal.

Commenting on the matter, John Cullinane, CIOT Tax Policy Director, said: ‘Robust systems will need to be implemented by HMRC to ensure that this soft landing is fairly and consistently applied, with the least amount of aggravation for businesses, their agents, and HMRC.’

Government must ‘change way tax and budget decisions are made’, report urges

In a recently published report, the Institute for Fiscal Studies (IFS), the Chartered Institute of Taxation (CIOT) and the Institute for Government (IfG) have called for the government to change the way it makes tax and budget decisions.

The report comes following the 2016 publication of an open letter to Chancellor Philip Hammond, in which the three organisations called for significant changes to be made to the UK’s tax system in order to ‘simplify the making of tax policy’.

It outlines the need to publish ‘clear guiding principles and priorities’ for tax policy, and to improve consultation, ensuring that consultations occur before key decisions are made.

The institutes also called for the implementation of a more robust policy-making process, and for decisions to be challenged before they are incorporated into the Budget speech.

The report did, however, welcome the Chancellor’s announcement to move to a single Budget each year.

Paul Johnson, Director of the IFS, commented: ‘Tax policy is too important to leave to the Chancellor alone. We need a more open policy-making process as a route to a better tax system.

‘The lack of any explicit tax strategy allows policy to be made on the hoof and makes it harder to engage the public in a much needed rational debate about tax.’

Concerns raised over payroll admin burden

07 Aug 2014

The Chartered Institute of Taxation (CIOT) has called for a relaxation of Real Time Information (RTI) requirements, which is being implemented in UK payroll systems.

RTI was introduced for large businesses in 2013 and has been phased in to encompass all UK businesses.

Colin Ben-Nathan, CIOT Employment Taxes Sub-Committee Chairman, said: ‘The competitiveness of a tax system is crucial for businesses and taxpayers who operate within its jurisdiction. Of course part of this is about rates, but survey after survey has found that, for many, administrative burdens are at least as important’.

Citing a recent survey conducted on CIOT members, he added: ‘Over half of the respondents replied that small employers should be allowed to opt out of RI reporting, saying their clients found it too prescriptive, time-consuming, and even unworkable’.

The statement was made in response to a call from the Office of Tax Simplification (OTS) as part of a review of competitiveness of tax administration in the UK.