MTD: Are your clients ready? Here’s a three-step guide

MTD: Are your clients ready? Here's a three-step guide

Ed Molyneux, CEO and co-founder of FreeAgent shares his three step guide to ensuring your clients are ready for Making Tax Digital.

MTD: Are your clients ready? Here’s a three-step guide

With the deadline for the first quarterly Making Tax Digital (MTD) for VAT returns now behind us, time is running out for accountants to get their clients MTD ready.

Some clients may be reluctant to adopt the digital submission process, partly due to a lack of understanding about the new process and the benefits of cloud accounting software. Yet, when accountants highlight the features of cloud accounting software, including control over finances, recurring invoices, 24/7 access to data and useful reporting features, it’s easy for clients to see the benefit for their businesses.

You’ll need to recommend which cloud accounting software would be best suited to your clients’ businesses based on their different needs. Advise your clients to learn how to use the software sooner rather than later so that they have time to resolve any issues. It may seem like a daunting task, but there are just three key steps you need to take to get your clients well on their way to being MTD compliant.

1. Encourage your clients to adopt a cloud accounting solution

Migrating to a cloud accounting system is key to successfully digitising your clients’ taxes. It’s an opportunity for your small business clients to streamline their record keeping, simplify their finances and cut down on admin time. It’s also an opportunity for you to take advantage of the latest technology, improve their workflows and generate growth within your practice.

If your practice and all of your affected clients are already using cloud accounting software to submit VAT returns, you still need to ensure clients are ready to file their VAT returns through the MTD system. To do this, you’ll need to set up an agent services account with HMRC and if you’re planning to file VAT returns on behalf of your client, ensure that you have their permission to do so.

2. Categorise and contact your clients

Not all of your clients will need to be registered for MTD for VAT, so it’s important to split out your client base in order to determine who is and who isn’t affected. Your first port of call should be to identify all of your clients with sales above the VAT threshold. Then, identify which of your remaining clients will soon be approaching the VAT threshold, and are therefore likely to be impacted. Finally, if any of your clients already use MTD-compatible cloud accounting software for VAT return filing, keep them in a different category.

You’ll also need to know when each client’s VAT period comes to an end, so you can advise them accordingly when it comes to MTD. You may have already reassured clients that are not registered for VAT that the MTD for VAT changes don’t apply to them, however it’s still a good opportunity for them to adopt cloud accounting software to make both of your lives easier and prepare for the full MTD rollout.

Clients will generally fall into four categories:

  • VAT-registered clients who are already using MTD-compatible cloud accounting software
  • VAT-registered clients who are not yet using MTD-compatible accounting software
  • Clients who are using accounting software but are not VAT registered
  • Clients who are not yet using MTD-compatible accounting software and won’t be affected by MTD until at least 2021

You’ll need to get in contact with each of these groups to let them know what they need to do to prepare for MTD.

3. Copy your clients to your agent services account

The agent services account is the one you need to use to access the majority of online HMRC services in order to comply with MTD. It’s important to note that the agent services account is not the same as the Government Gateway account.

In most cases, you’ll need the following information in order to copy a client to your agent services account:

  • VAT registration number (VRN)
  • Company registration number (CRN)
  • National Insurance number (NINO)

In order to copy your affected clients, they will have to confirm that they can be added to your account from their own HMRC online account. You’ll need to send them an invitation to do this. New clients and clients who have not yet given permission will need to provide authorisation for you to submit returns on their behalf.


Ed Molyneux is CEO and co-founder of FreeAgent, which specialises in accounting software.

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