Hi

It didn’t make the headlines, but it probably should have. Hot on the heels of the announcement that P&L filing may be shelved… HMRC has scrapped Making Tax Digital for Corporation Tax.

Buried in HMRC’s latest digital transformation roadmap, released on 19 July, was a quiet confirmation that Making Tax Digital for Corporation Tax (MTD for CT) is no longer happening.

Yes – after years of speculation, stalled timelines and silence, HMRC has officially binned it.

Instead, they now say they’re “developing an approach to the future administration of CT that is suited to the varying needs of the diverse CT population.”

What that means in practice no one knows yet. The document doesn’t explain. But it’s a big shift.

A project that never really got going

To be fair, this one had been on life support for some time.

Unlike MTD for VAT and the delayed (but still going ahead) MTD for Income Tax, MTD for Corporation Tax never really got out of the gate.

There was a consultation way back in 2020. There was talk of quarterly updates and digital records. But since then? Not much. No roadmap, no firm start date – just a vague mention that it might arrive after 2026/27.

Now we know it won’t be arriving at all.

And that’s probably a good thing. Corporation tax is already a complex beast, and the benefits of digitising it for small companies were never convincing. Most companies already keep digital records. Imposing another layer of reporting wouldn’t make them more accurate – just more burdened.

Was MTD for CT ever necessary?

That’s the big question.

If most small companies are already using cloud tools – Xero, QuickBooks, etc. – what extra value was MTD for CT going to bring?

Better productivity? Less error? HMRC’s own stats didn’t back that up.

Chris Downing from Sage hit the nail on the head: “Why create yet another compliance burden for businesses when existing systems already nudge them towards digital?”

I agree. This always felt like an exercise that risked distracting from more pressing digital priorities.

But the tax gap is growing

Here’s the twist. Just as HMRC shelved MTD for CT, they also published new figures showing the corporation tax gap – the difference between tax owed and tax collected – has more than doubled since 2011. It’s now 15.8%, and accounts for 40% of the total tax gap.

So yes, there’s clearly a problem.

But rather than reaching for clunky compliance rules, HMRC say they’re using data-driven nudges, AI, and cross-referenced third-party data to improve accuracy and promote compliance.

That sounds more intelligent. And much less disruptive to businesses.

What’s next for CT?

While MTD for CT is off the table, corporation tax itself is still firmly in the spotlight.

HMRC’s roadmap hints at modernisation, not abandonment. They’ve acknowledged – finally – that the corporation tax population is incredibly diverse. It includes:

• One-person consultancies
• Charities
• Property companies
• Multinationals
• And everything in between

A one-size-fits-all model just won’t cut it.

So, we can expect changes. But hopefully, they’ll be proportionate, well-communicated, and driven by data – not by headline-grabbing reforms.

Will this change behaviour?

One knock-on effect could be around incorporation decisions.

With MTD for income tax still going ahead – and quarterly reporting becoming mandatory for sole traders and landlords earning over £50,000 from April 2026 – some might now be tempted to incorporate to avoid it.

I wouldn’t recommend incorporating purely for that reason. But for some, it may be the final nudge they need.

Especially since, as I reported yesterday, the future of another compliance burden – filing your profit and loss account at Companies House – is also in doubt.

In the space of a week, we’ve seen two major regulatory shifts soften or disappear altogether. Perhaps there’s a broader rethink under way?

There’s a welcome theme emerging here.

HMRC and the Department for Business both seem to be rowing back from blanket regulation and leaning into smarter, more targeted compliance.

Not everything needs to be digitised for the sake of it. Not every business needs to file everything, everywhere, all at once.

What we need is better use of data, clearer communication, and a focus on value-added digital tools – not just more filing deadlines.

So, is this the end of digital transformation in tax? Far from it. But maybe it’s a sign that future changes will be more thoughtful, more balanced – and more in tune with how real businesses work.

Noel Guilford