When HMRC announced last year that businesses would be required to update them on a quarterly basis via their digital tax account many assumed this would mean businesses would have to complete four tax returns a year and, as a result, the taxman came in for some serious stick from some commentators.

But now HMRC’s newly-published ‘myth-buster’ has straightened out the situation once and for all…or has it?

You may recall that before Christmas HMRC issued a document in which they stated that businesses will have to ‘update HMRC at least quarterly via their digital tax account’. No details were given about what this would actually mean, but in the absence of specific information, the vacuum was very quickly filled with speculation. Many people, not surprisingly, interpreted this as meaning that business would have to complete four tax returns each year.

Two things happened as a result - a debate in parliament and the publication, by HMRC, of a document with the extraordinary title ‘Making Tax Digital: myth-buster’. The debate and the publication both make the same point: quarterly reporting does not mean quarterly tax returns. It means sending information to HMRC directly from accounting records which will be kept electronically. What that information is, and how it is to be sent to HMRC is still unknown.

At the time (admittedly without knowing exactly what ‘update HMRC at least quarterly’ meant) we applauded the move to quarterly reporting as it would, at least, mean that small businesses would have to keep up to date records, which can only be a good thing.

But, there are important lessons here for the way in which HMRC communicates with taxpayers. In a world of instant electronic communication it is very easy to lose control of the agenda, which is exactly what has happened here. HMRC should have been much more explicit upfront in the way that this change was explained so that the ‘myths’ didn’t develop in the first place.

I have some sympathy for HMRC because they want to take a collaborative approach to all of this, to roll things out gradually and to consult at all stages in the process. This must be right in principle, but it does run the real risk that a lack of detail leaves people in the dark and allows rumours to flourish.

In an environment where the internet allows ideas to go viral in a matter of minutes, the calm civilised timetable of HMRC consultations may not be realistic.

In the meantime our advice is to ignore all the scaremongering (of which there is a lot coming from commentators, including accountants) and start to plan how to automate your accounting records – if you have not already done so – so that you have up to date financial information in time for the introduction of digital tax accounts.

If you adopt software like Xero Accounting, by the time quarterly reporting is introduced it will have been updated to file your digital information for you.

If we can help you to source the best software for your business just let me know by replying to this email.

To your success

Noel Guilford