In a letter published in the Financial Times Jim Harra, HMRC’s tax assurance commissioner and former director-general for business tax, denied that switching to MTD would require businesses to make quarterly returns as well as their annual return.

Harra said: ‘HMRC will not be asking anyone to file accounts five times a year, nor will we be introducing in-year quarterly payments. Businesses will simply send in-year updates to HMRC using information collated automatically by the same software used to record day-to-day transactions.’

On the question of the cost to business of the changes, Harra stated: ‘Businesses already keeping their records digitally should see no additional costs at all. Free software will be there for businesses with the most straightforward affairs, and we are looking at additional assistance with transitional costs.’

Harra concluded his letter, published on the paper’s comments page, by saying: ‘We fully recognise that this is a significant change for some businesses, which is why we’re introducing it gradually as well as exempting some of our smallest businesses, but at the heart of digital transformation is a simpler, more efficient tax system that frees business people from red tape and form-filling.’

The HMRC consultation on MTD, which included six sets of documents covering different elements, closed this week on 7 November. The plans have been attacked by professional bodies, groups representing SMEs and others on the grounds that there is insufficient time to prepare for implementation; concerns about the level of information to be provided quarterly; confusion over what constitutes a digital record with suggestions that Excel spreadsheets would not be sufficient; and calls for the threshold for mandatory participation to be raised substantially.

Commenting on Harra’s letter Yvette Nunn, co-chair of ATT’s technical steering group said: ‘As the government is driving the move to mandatory digital record keeping, it must be prepared to invest whatever amount of financial support is required to ensure that taxpayers can reasonably meet those obligations.

‘It is important to appreciate that very many taxpayers are fully meeting their tax obligations with the use of manual record keeping systems. For them, the compulsory change to digital record keeping offers no advantage.

‘If quarterly digital reporting were not being introduced on a mandatory basis then there might be the possibility of having a discussion about a reasonable level of financial support. However, where it is effectively being forced upon everyone, we don’t think there is a reasonable level. It will take whatever it needs to take to get everyone on-board and if the government is unable to invest to that extent then it really does need to rethink the mandatory aspect of the MTD proposals.’