This will see most companies, apart from the most complex incorporated businesses, as well as the self-employed and landlords who are registered for and payVAT, having to report VAT via the new Making Tax Digital quarterly reporting system from April 2019. It is not clear exactly how this will work as details are still rather vague.

It appears that legislation, and associated HMRC guidance, will be introduced in a future Finance Bill which will outline the specific requirements.

This means that those affected will have to provide summary tax data to HMRC quarterly, using digital tools - the summary tax data will be automatically generated for the business from the electronic records:

for VAT, these quarterly updates will effectively replace the VAT return; and

for income tax and corporation tax, these quarterly update reports will cumulatively build an in-year picture of the business’ tax position, giving HMRC deeper insight into activity.

Large partnerships will have to start reporting VAT through Making Tax Digital from 2019.

The VAT threshold is currently £83,000 and there is already a quarterly reporting requirement for VAT, which will be superseded by the new digital tax programme.