1. Talk to your clients
Check if and when your clients will have to join MTD for VAT. You can use this HMRC communications pack to make your clients aware of what MTD is and what they have to do.
If your clients submit their own VAT Returns and want to continue to do so, they will need to sign themselves up for MTD if their taxable turnover is above the threshold and they're not exempt for any reason. You may want to segment your clients based on whether or not they're VAT Registered and need to sign up to MTD, VAT Return frequency, whether or not you have the authority to file VAT on their behalf and therefore whether you or the client themselves will sign them up for MTD. You will also need to ensure MTD VAT filing software is in place where necessary.
2. Find compatible software
Before you sign up your business, or your clients' businesses for MTD, you must ensure you have the right software for submitting VAT Returns directly to HMRC. FreeAgent, QuickBooks, Sage, and Xero are all compatible with MTD but you may need to check you're using the right version.
MTD requires you to not only submit your VAT Returns with software but also to keep digital records. Excel files count as digital records, but you cannot use Excel for submitting VAT Returns. If some of your clients are still just using Excel you should discuss with them the benefits of moving to cloud accounting software. In the meantime, you can use 'bridging software' to connect Excel, or other spreadsheet software, with HMRC for submitting VAT Returns. Some bridging software is free and is included in the above list.
Sage has two MTD-compatible products: Sage 50cloud Accounts and Sage Business Cloud Accounting (previously known as Sage One). These are collectively referred to as 'Sage Business Cloud'. If you have any clients on a Sage 50 perpetual licence they will need to move to Sage 50cloud on subscription, or subscribe to the MTD submission module, or transition to the fully cloud-based solution to Sage Business Cloud Accounting.
You can find more information regarding MTD-compatible Sage software here.
QuickBooks Online and QuickBooks Desktop 2017, 2018, 2019 are MTD compatible as long as the subscription is up to date. If you or your clients are using a 2016 version or earlier of QuickBooks desktop, this needs to brought up to date with a subscription to either 2019 Desktop of Online. You can find more information regarding this here.
Find MTD compatible Accounting and Bridging Software here:
3. Create an HMRC agent services account (ASA)
This new ASA account is the tool you will use to sign up clients to MTD, you'll still need to keep your main HMRC online services for agents account. If you don't have an online services for agents account, and you want to act as an Agent on your clients' behalf, you need to set that up first. Please see ICB guidance on becoming an Agent here:
You'll have just one ASA for the whole practice and it will be linked to your UTR. The UTR you use depends on the type of entity you are: income tax self assessment UTR for sole trader, partnership UTR for partnerships, and corporation tax UTR for those trading as limited companies. Make sure the UTR matches your practice’s registered postcode as far as HMRC is concerned or you’ll get an error message.
You'll also need to tell HMRC that you're supervised by ICB and put in your expiry date. We're on the list as Institute of Bookkeepers (ie. without the 'Certified'). You should use your Practice Licence number and expiry date.
You’ll be given a new Government Gateway ID and a new Agent Services reference number. You’ll need to think carefully about the email address you use; you can’t currently change it within the ASA and you might need to share it with multiple team members. We understand that HMRC is considering enabling different team members to use different passwords in future for security reasons. You can add additional administrators or assistants but you won't be able to set access levels like you do in your normal agent account.
Bear in mind that you won't be able to see a list of your clients within the ASA but you should be able to 'view your linked accounts' to ensure that all of your relevant agent accounts are linked. HMRC has advised that the client list is hidden because of the limited access heirarchies available at this time, so this may change. Bear in mind though, you will be submitting MTD VAT Returns through your accounting or bridging software so you will not be using your ASA for this purpose and will not need to use it to check clients' details.
Create your ASA here:
4. Link existing client relationships and new clients to your ASA
To send VAT Returns (and eventually Income Tax updates) for clients who need to sign up for Making Tax Digital, you’ll need to link them to your ASA. You can link your existing clients or add new ones. Find out more from HMRC here.
When you're logged into your ASA, select ‘Copy across your existing Self Assessment and VAT clients to this account’. Add each of your agent Government Gateway IDs to the account - these are the Government Gateway IDs which you use to access HMRC online services for your clients and are linked to your agent codes.
All of your exisiting online services clients will then be linked to your ASA, and this is a dynamic link so it will update automatically with any updates from your main account. Don't worry if you're not planning to submit MTD VAT returns for every single client, all you've done is link your new ASA with your existing Online Services for Agents account. You will need to carry out a further step to tell the ASA which of the clients will now be 'submitting VAT digitally' ie. MTD for VAT.
You can now also request authority to submit VAT for any new VAT clients. Select ‘ask a client to authorise you’. If you do this through your new Agent Services Account there’s no need for the 64-8 form. You’ll need to enter their VAT Number and VAT registration date and then you’ll get a special link to send the client that they use to authorise you. Note that these clients must have a Business Tax Account (BTA) in place in order to authorise a new agent relationship.
5. Sign your clients up for MTD via your ASA
As soon as you do this their next VAT Return must be sent the MTD-way and you can’t undo this step. Your clients can sign themselves up for MTD if they/you so decide. You can direct them to this link https://www.gov.uk/guidance/sign-up-for-making-tax-digital-for-vat
If you are signing your clients up for MTD VAT on their behalf through your ASA, you’ll need to log in to your ASA with your new ASA Government Gateway user ID and password. Make sure you sign them up at least 72 hours before their VAT Return is due, or 7 working days before if they pay by Direct Debit.
You will need your client’s:
- VAT registration number
- business entity type (this is not required for overseas companies with no UK establishment)
- limited company, limited partnership, registered society name as registered at Companies House or any additional identifiers for:
- limited company or registered societies - company registration number
- limited partnerships - company registration number, partnership Unique Taxpayer Reference (UTR) or postcode where the business is registered for self-assessment
- general partnerships – partnership UTR or the postcode where the business is registered for self-assessment
- sole traders –National Insurance contributions number
- other entity types - only the VAT registration number is required - no other identifiers
- contact preference – paper, emails and HMRC account secure messages
- business email address (for clients who pay by Direct Debit and for those who select email or secure message as a contact preference)
You will also need your own email address for the sign up confirmation email.
This is probably the most time-consuming step of the MTD setup process because you will need to manually enter the details of each client whom you want to sign up for MTD VAT.
When you get to the last screen there is a green button that says ‘sign up another client’ After you have signed up your clients, you will receive an email within 72 hours to confirm that you can submit your clients' returns digitally.
Clients do not need to be involved when you sign them up to MTD yourself, this has changed since the pilot. You will be asked to provide the client's email address but this is only a requirement for clients who pay by direct debit. Clients no longer need to have a government gateway ID and access to their business tax account in order to complete the sign up to MTD for VAT process.
Sign your clients up for MTD here:
6. Authorise your software and then switch clients to MTD VAT Returns within your software
The final two steps are completed within the accounting or bridging software you're using to submit your clients' VAT Returns.
a. Authorise your software
You will need to enter your new ASA credentials into your software to enable it to submit VAT Returns. Where you do this will depend on what software you're using.
b. Switch clients over to MTD VAT
You will need to switch individual clients over to MTD VAT Returns within your software and, again, how you do this will depend on your software.
HMRC recommends using the ‘Get help with this page link’ on the web page where you experience any difficulties. You should receive a response within 2 working days.
You can also phone the dedicated agent line on 0300 200 3311 and ask to speak to the MTD team.