SMALL businesses in East Lothian beware: the taxman is after you.

HMRC has a new project called “Making Tax Digital”. That sounds innocent enough but there is a big sting in the tail. From 2018, many businesses will no longer do their tax return once per year. Instead, you will be obliged to make quarterly returns online, plus a year-end consolidation. If my maths are correct, you will be doing five returns a year for the taxman. Which means not only will you be spending more time in front of the computer, you will be forking out more cash to your accountant.

As a member of the Treasury Select Committee at Westminster, I’ve been trying to get to the bottom of what HMRC is up to. The alleged reason for Making Tax Digital is, according to government ministers, to make life simpler for the average business. Once every firm does their accounts online – you are promised “free” software once they actually get round to writing it – owners and managers are promised a smoother, easier time doing their books. Actually, the real gain is for HMRC. The department says that Making Tax Digital will “capture” unpaid taxes lost because firms don’t (in the opinion of HMRC) file properly. In fact, the Treasury hopes to net an extra £945 million in tax per annum by 2020-21.

The danger is that many sole traders will drop off the books or just give up the struggle to earn a crust in the face of yet more HMRC bureaucracy. Those that comply will end up paying an average of some £1,700 a year in extra accounting fees, according to the Federation of Small Businesses. I dare say, a decade or more in the future, that an all-digital tax system might have benefits. But it will drive many small companies nuts as they struggle to comply.

Meanwhile, HMRC says it is “investing” £1.3 billion in updating its computers to provide better handling of company tax affairs. But our Treasury Select Committee investigation suggests that HMRC is using the squeeze on small firms to pay for this new equipment. Fortunately, Parliamentary pressure on HMRC has pushed back the implementation date for Making Tax Digital for a range of smaller companies. My aim is to get HMRC to put back final implementation until 2025, to give firms a chance to adjust. Fingers crossed!