How to set up your practice and clients for Making Tax Digital for VAT

Making Tax Digital (MTD) for VAT comes into effect for most businesses with a turnover above the VAT threshold in April 2019. This means you will soon need to start submitting MTD VAT returns on behalf of these clients using compatible accounting software.

Before you can do that though, there are some steps you need to take to get your practice and clients ready for the shift to digital VAT filing. This guide explains exactly what you need to do to get set up for MTD for VAT with HMRC.

Setting your practice up for MTD for VAT

1. Create an agent services account

Creating an agent services account for your practice will generate a new Government Gateway ID which will give your practice access to HMRC’s MTD services. You can do this by visiting HMRC’s website at gov.uk/guidance/get-an-hmrc-agent-services-account. A practice will only ever have one set of credentials for MTD and you will need to keep hold of any existing Government Gateway IDs you use to access HMRC’s other online services.

If you’ve signed up for the Trust Registration Service (TRS) you may already have an agent services account in place. If this is the case, you don’t need to create a new account; simply log in and follow the steps outlined below.

2. Link existing client relationships to your agent services account and request authority for new clients

The next step is to log in to your agent services account and add all of your practice’s existing Government Gateway credentials for VAT filing on behalf of clients. This will link the authority your practice currently has for VAT filing to its agent services account.

If you have multiple sets of credentials you will need to add them all to your agent services account in order to transfer the authority for all your existing clients.

You should request authority to file MTD VAT returns on behalf of any new clients directly from your agent services account. Note that these clients must have a Business Tax Account (BTA) in place in order to authorise a new agent relationship.

3. Authorise your MTD-compatible software

Once you’ve successfully created your agent services account you can use the new credentials you’ve received to connect your software with HMRC. If you think FreeAgent is the right software for you and your clients, this can be done in a few simple steps.

Signing clients up to Making Tax Digital and completing the setup of your MTD-compatible software

Once your practice is set up for MTD VAT filing, you need to sign your clients up to MTD with HMRC and then complete the setup of your software.

Signing clients up to MTD with HMRC

Before you get started, please note that once a client is signed up to MTD with HMRC, their next VAT return must be made using MTD-compatible software!

When you’re ready to sign a client up to MTD, access the signup form at: gov.uk/guidance/sign-up-for-making-tax-digital-for-vat

Once on the web page, you should enter:

• the Government Gateway ID and password for MTD services (these are the credentials you generated when you created your agent services account)
• each agent Government Gateway user ID used by your practice for your VAT clients
• each client’s VAT registration number
• additional information about the client’s business
• the client’s email address

Alternatively, clients can sign themselves up to MTD by going to gov.uk/guidance/use-software-to-submit-your-vat-returns.

Switching to MTD filing

The final stage of the process is to complete the setup of your MTD-compatible software. To do this you will need to have added all your clients to the software you plan to use for MTD filing.

Best practices for managing the process

 It’s important to proactively identify which of your clients will be affected by MTD for VAT.  A good first step could be to identify those that are over the VAT threshold, before identifying those with growing businesses who may go over the VAT threshold soon.

With questions likely to be coming in from concerned and prospective clients alike, it’s important to be aware of the wide-reaching effects of MTD. Be sure to let your clients know what the changes are and how it will affect their businesses. This is your opportunity to get them excited about the benefits of accounting software such as control over their finances, recurring invoices, 24/7 access to data and useful reporting features.

Finally, you’ll need to choose an MTD-compliant software that’s right for both you and your clients going forward.

Need a helping hand with your Making Tax Digital preparation? Take a free consultation with FreeAgent for help with everything you need to do before the deadline. Visit freeagent.com/accountants/mtd-consultation