The YouTube video is less than four minutes long and focuses on a fairly simplistic approach to the benefits of digital tax accounts, focusing first on a self employed plumber, who does not use any tax accounting software.

The brief video (3 mins, 42 secs) stresses how the new system will allow sole traders to manage their tax liability easily using the new digital tax accounts - they will be able to download an app that will prompt them to update their expenses and they will receive a monthly esimate of their outstanding tax bill, with a view to allowing sole traders to plan potential tax liability in advance. The plumber in this example takes pictures of receipts and uploads them to the HMRC digital tax account via a smartphone, for example.

In the video, the HMRC voiceover stresses: 'His digital tax account has now been updated - he knows how much to set aside for paying his tax bill later in the eyar. He has no more worries about what tax he has to pay.' 

It also stresses that this does not represent a move to quarterly tax reporting, in the same way as VAT returns are currently submitted.

Most of the UK’s 5.4m businesses already manage their tax online – over 99% of VAT returns are submitted online although the majority of business customers use intermediaries such as tax advisers and accounting firms to complete their accounts, something which HMRC still needs address before the new system can be rolled out.

The plan is that by 2020, annual tax returns will be abolished and replaced it with a ‘simpler online system’, claims HMRC.

The new digital tax accounts integrate the different information businesses have to provide into a single process, from entering it in a business recordkeeping app through to sending it to HMRC.

However, the plans for quarterly reporting have come in for fierce criticism from tax advisers, accountants and professional institutes.

HMRC claims that ‘instead of one big, onerous tax return each year, businesses can check that the information they are recording is correct, and simply click "send" to update HMRC once a quarter’.

The argument from HMRC’s perspective is that small businesses will be able to track their tax bills more effectively with a quarterly reporting system.

HMRC states: ‘Many taxpayers want more certainty over their tax bill and access to an in-year picture of their tax position, which their new digital accounts will provide. We know that too many viable new businesses go under when they receive their tax bill simply because they didn’t know how much to set aside. Digital tax accounts will help fix this issue.’

For those small businesses who aren't already keeping records digitally, there will be a range of software packages and apps available to use, including free ones for those with simple, straightforward tax affairs. There will also be clear, simple advice on how to use the new digital tax account.

Later this spring, HMRC will consult widely on how the new system should operate.

There are concerns that the new plans will create a digital divide with those businesses without broadband access at a disadvantage. HMRC says that ‘people who genuinely can't use digital tools - perhaps because they can't access broadband, or don't own a computer or smartphone - will be offered alternatives, like nominating someone else to update their information for them, or giving information by phone’.

At the same time, it is not clear when HMRC will start communicating with individual taxpayers about their personal digital tax accounts which are set to come into force this April.

An animation called Making Tax Digital video on YouTube showing how the new digital tax accounts will work is available at HMRC’s YouTube channel