MTD: It’s time to get your ducks in a row

MTD: It’s time to get your ducks in a row

Julia Wedgewood, Insight Lead of Accountants and Bookkeepers at Sage, on how accountants can help their clients get ready in time for the MTD deadline - now less than two months away

MTD: It’s time to get your ducks in a row

With the deadline for compliance approaching, Making Tax Digital (MTD) has become a major frontline focus for those in the accountancy sector. But the new guidelines don’t just affect accountants. The new government scheme requires any VAT-registered businesses (companies with a turnover over the current threshold of £85,000) to digitally submit their tax records to HMRC, rather than via the current Government Gateway – meaning accountants not only have to work on their own compliance, but also know how to help their clients to comply.

To make it harder, according to a recent report from the ICAEW, more than 40% of businesses that will be affected by MTD for VAT are still not yet aware that they need to comply – despite these changes being scheduled for rollout on April 1.

With the MTD deadline less than two months away, businesses now need to be focused on what they need to do and put a plan into action. The good news is, it’s not too late. By following these guidelines, accountants can help their clients register as compliant ahead of the impending deadline.

1. Set up an agent services account – and watch your timing

For agents making VAT submissions on behalf of clients, it’s necessary to first set up an agent services account with HMRC. This account is required to access the new HMRC online services including MTD.

Accountants will only be required to set up one agent services account for the individual responsible for the organisation’s tax and administration dealings. If you’re not yet compliant, it’s important to get this set up in advance to be able to get clients live for MTD VAT.

The new MTD gateway is not the same as the existing platform. That means you have to allow time to move each client’s bank details from the old platform onto the new one. Remember, it takes five working days after your last non MTD VAT return per client to do this. Not only that, but it also needs to be done 15 working days before your first ever MTD VAT return.

If one thing’s clear, it’s that timing is key. Make sure you plan the workload well in advance, or risk scrambling for compliance at the last minute.

2. Make sure you’ve done due diligence on your clients’ (and your own) bookkeeping readiness

MTD offers the perfect opportunity to help your clients review their current bookkeeping processes. They need to ask themselves – are we performing these processes digitally, or are we still doing it manually? If the answer is the latter, then it’s time to make a change. It’s important to keep digital records of all your transactions – and we appreciate that for some companies used to working out of boxes and with excel documents, this will be a big and daunting change.

While it may seem far too time consuming to move all records into digital files, the time saving in the long run will be worth it. It will take much longer to key in VAT data manually for the rest of time than it will be make use of automation via bookkeeping software. If you keep using spreadsheets – or pen and paper, for that matter – you’re lumping yourself with a huge amount of unnecessary admin to get the info into your digital VAT returns. With digital, automation software like Auto Entry and Receipt Bank, it is possible to save time, improve efficiency and productivity.

3. Don’t go in blind – participate in pilots to help yourself get ready

In the lead up to MTD, it’s possible to take part in an MTD trial – and that really is a no-brainer. Why not run a pilot for your own practice so that you know what you need to do for your clients?

This will be beneficial in identifying any refinement you can apply to your processes before the MTD deadline. Use your own company as the guinea pig – better to iron out any wrinkles internally before going client-facing.

Not only this, but adopting systems that are compliant with MTD early gives you the chance to get familiar with submitting your VAT returns under the new system, before it becomes mandatory. You can sign up for the MTD open pilot here.

4. Keep in touch with clients who do their own VAT Returns.

Most accountants will encounter two types of clients in relation to MTD. The first type is the client whose VAT returns they’re responsible for submitting.

The key with this group is to ensure that you have communicated the changes clearly to the client. Once registered for MTD, the client will receive a confirmation email and need to make changes to the way they provide their accounting information – so it’s important to pre-prepare them. These clients will need to understand how to change the way they record their transactions – for example, implementing bridging tools to automatically report into their accountant – so it’s essential that they understand what’s required of them.

The second type of client manages their own VAT returns. The key here is that if they are doing their own work, do they know clearly enough what they need to do to get it right? Your relationship with them will take the fall if they get caught out by HMRC.

Do they understand when to switch on the MTD software, what their compliance deadline is, which VAT return should be the first to be completed under MTD and the fact that they need to register their own compliance? As their accountant, it’s your responsibility to communicate this back to the client – to ensure they are aware of every detail.

At the end of the day, it’s still not too late to get ready for MTD. By mapping out these steps to compliance and prioritising essential tasks, businesses can plan to flick the switch and register their MTD compliance before the 1st April this year. So, what are you waiting for?

It’s time to embrace a more digital way of working.

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