Small businesses and self-employed will be exempted from new plans to make tax reporting digital.

Her Majesty’s Revenue and Customs yesterday unveiled six consultation documents on changes to the tax system.

It said that the decision to exempt the smallest businesses and landlords from digital record-keeping and quarterly updates follows months of engagement with business and agent groups.

Mike Cherry, national chairman of the Federation of Small Businesses, said: “The government has listened to FSB representations on behalf of small businesses up and down the UK.

“Removing small firms and the self-employed with modest turnovers altogether from the proposals will now mean that in addition to the 1.6 million small businesses and landlords that were already excluded, as a result of these changes announced, a further 1.3 million small firms and landlords will no longer be in scope.”

The Making Tax Digital project is aimed at making tax payments more efficient by replacing the annual tax return with simple, digital updates.

After the plans were originally announced, a petition titled ‘Scrap plans forcing self employed & small business to do four tax returns yearly’ was signed by more than 100,000 people and debated in Parliament in January.

Edward Troup, executive chair at HMRC, said: “Making Tax Digital represents very significant change.

“It will bring the tax system into the 21st century and help make HMRC one of the most digitally-advanced tax administrations in the world.”

He said that there was a lot of work remaining to design and develop the system in consultation with HMRC’s customers