Last month I wrote about HMRC’s Making Tax Digital Project.

It is one of the hottest current issues in tax.

The level of awareness in the self-employed and small business communities - and I include landlords here – is however still worryingly low. HMRC’s current plans mean that keeping business records digitally using apps and software will soon be a legal requirement. Hand written records will be a thing of the past.

HMRC has issued six consultation documents and if you are in business or you rent properties and your annual sales (or rent) figure is greater than £10,000 you are likely to be affected.

You should talk to your accountant sooner rather than later to find out how and when this might affect you. Alternatively, you can find more information on HMRC’s website.

I am a fan of digital technology and I see great potential for businesses using it more widely. I do not however believe it should be compulsory: businesses are more than capable of deciding what does and doesn’t work for them.

HMRC’s interest in digital goes way beyond the current project however. Digital data provides HMRC with a wealth of information for targeting tax enquiries.

HMRC’s Connect system trawls government and public databases and compares what it finds with what is shown on tax returns.

It trawls the Land registry for details of land and house sales. It trawls the DVLA database to see what car – or cars – someone owns. It trawls Ebay to look for people trading online.

It analyses returns of bank and building society interest. It is also now being fed with information from accounts held in Crown Dependencies and from next year it will have access to information from many other countries. Connect is said to hold more information than the British Library and can make connections in a fraction of a second.

There is a wealth of other information available on the Internet and through social media to give HMRC clues about lifestyle and whether it is consistent with tax returns.

Digital technology is changing the way HMRC operates and the way individuals and businesses engage with it. Whether it is through Making Tax Digital or through the analysis of data for enquiries, it is important to be aware of just how digital the tax world has become.

Paul Aplin OBE is a tax partner with A C Mole & Sons and Vice President of the Institute of Chartered Accountants in England & Wales.

You can follow him on Twitter @PaulAplinOnTax. He and fellow tax partner Amanda Gunter can be contacted on 01823 624450.