While the VAT reporting element is mandatory from 1 April, HMRC is also encouraging agents to start using the Making Tax Digital for Income Tax for clients with income from one business and landlords (except those with furnished holiday lettings).

Under Making Tax Digital, it will only be possible to digitally report via an agent services account (ASA).

It is important to note that each firm may only have one agent services account, for use across all clients. It is also multifunctional account, so where a firm has already registered for the trust registration service (TRS) or signed clients up for the MTD for income tax pilot, they will not need to create a new account for MTD for VAT.

Client registration requires the client’s VAT registration number (VRN), company registration number (CRN) and national insurance number (NINO), depending on the circumstances.

Once a client is signed up to Making Tax Digital for VAT, they will have to submit digital VAT returns using compatible software or an extension tool, and will not be able to continue using the existing system.

Businesses that pay by direct debit must sign up at least 15 working days before they need to submit to allow the payment to be taken.

The first payment dates via the digital reporting system will start from August so there are a few months to complete the registration. However, this is not a real-time process and HMRC has confirmed that it takes seven working days to activate a Making Tax Digital account.

How to set up an agent services account (ASA)

Step 1: creating an ASA

• before signing clients up to MTD you must create an ASA;
• read guidance and create an account;
• ASA is currently only used for the TRS, the MTD VAT service and the MTD Income Tax service;
• use current Government Gateway (GG) ID to create an ASA, and as part of signing up will receive new credentials to access MTD services; and
• you still need your current GG IDs to access other HMRC online services.

Step 2: linking existing agent-client relationships

• after the new ASA has been created, use the service to link existing authorised client relationships;
• the ‘link clients service’ is accessed from the ASA. Once each client is linked, you will see an ‘Account linked’ message;
• input your current Government Gateway IDs so HMRC can identify the relationship already exists; and
• all clients that exist under a specific Government Gateway ID are linked to the ASA (for multiple Government Gateway accounts this step may need to be repeated to link all clients).

However, the client list cannot be viewed from within the ASA.

Step 3: authorise MTD-compatible software

• before signing a client up to MTD make sure you/they have MTD compatible accounting software;
• if using existing software, make sure it is MTD-compatible and that its MTD capabilities have been enabled;
• delegate authority to the MTD compatible software after the client has been signed up to MTD (this applies to both new and existing software).

Once signed up, returns must be submitted using MTD-compatible software as the previous method will no longer be available.

Step 4: sign business up to Making Tax Digital

• using the new Government Gateway ID created for your ASA you can sign up clients
• you will receive confirmation that the client’s information has been received. HMRC will email confirmation (usually within 72 hours) to start using MTD software to submit the client’s return
• inform clients that returns are being submitted through Making Tax Digital; and
• each client needs to be signed up individually, or the client can sign themselves up.

Important: when connecting software to HMRC you must use your new ASA Government Gateway ID.

HMRC systems will be unable to recognise any other Government Gateway IDs as this will not show the client relationship. The return will be rejected and an error message will be sent.

For larger firms or practices using bespoke in-house software solutions, IT teams need to be aware of the new MTD technical standards as they may want to link in-house solutions directly to HMRC’s application protocol interfaces (APIs). Details from SDSTeam@hmrc.gsi.gov.uk

Effective from 1 April 2019

Mandatory Making Tax Digital for VAT came into effect from 1 April 2019 and applies to VAT-registered businesses  over the £85,000 VAT threshold.

The deadlines for sending VAT returns and making payments have not changed, including for monthly, quarterly and annual VAT return schemes.

Under the new VAT reporting system, businesses have to keep digital records and send the returns to HMRC using MTD-compatible software for VAT accounting periods that started on or after 1 April 2019 (1 October for those that have been deferred). This also applies to businesses that operate the Flat Rate Scheme for VAT.

HMRC Guidance Making Tax Digital for Business - stakeholder communications pack, updated 1 April 2019

Report by Sara White