How do I prepare for Making Tax Digital / MTD? – An Accountant’s perspective
What is the purpose of MTD?
HMRC is facing a number of challenges:
- Digitally, it is not at the forefront of technology compared to the majority of its contemporaries, competitors or ‘customers’.
- There is a huge amount of ‘available’ revenue that is currently not collectable – eventually businesses will be paying their tax bills much earlier.
- HMRC is hoping that MTD will reduce the number of submission errors and increase revenue.
- It also hopes to reduce its workload – like everyone else, HMRC has to do more work with fewer resources.
Is it really going to happen?
There have been rumours that MTD will be shelved or postponed. The House of Lords recently proposed that it should be postponed – but HMRC and a number of software companies have invested too much time and resource to abandon it now as the deadline is so close, and HMRC and the software companies are on track to deliver in good time.
Will it be affected by the outcome of Brexit?
If the outcome is a ‘No deal’ Brexit, plans are in place to deal with it and it will have an initial impact – but even that will not be onerous. We will keep you informed of its impact if it happens.
What do I need to do – as an Accountant?
There is much to do. So the sooner you start, the better:
- Review your client list and identify those that are VAT registered and over the threshold – £85,000. These clients will have to submit their VAT returns digitally from the first VAT period starting after 1st April 2019. There has been some misunderstanding as to when it takes effect:
- Monthly returns – the return for the period April 2019 must be be submitted by 7th June 2019.
- Quarterly returns – the return for the period April to June 2019 must be submitted by 7th August 2019.
- To your list of clients, add the date when the first VAT return is due and the date you need the digital records to start from. It is recommended by HMRC that you get your clients’ records started as soon as possible in order to make the transition easier.
- As an agent you will need MTD-compliant software that allows you to submit VAT returns to HMRC. Prelude will be compliant and recognised by HMRC very soon. You can still submit by spreadsheet but you will have to purchase an API (Application Programming Interface) and configure that into your spreadsheets – In our opinion, it will be easier and better to switch to competent accounting software.
- As an agent you will need to set up a new Agent Services Account (ASA) with HMRC. Only one ASA is required per practice. Here is the link: https://www.gov.uk/guidance/get-an-hmrc-agent-services-account
- If you have signed up for the Trust Registration Service (TRS) you will already have an ASA and will use this for MTD as well.
- Be aware that you can only set up an ASA if you have an Anti-Money Laundering Supervisor in your practice. If you haven’t already registered as an Anti-Money Laundering Supervisor, you must do so as soon as possible. You will need your or your practice’s Unique Taxpayer Reference (UTR) and the postcode associated with that reference. Here is the link: https://www.gov.uk/guidance/money-laundering-regulations-register-with-hmrc
- You will receive a new agent Government Gateway ID to access the new MTD services, and an account number, in this format XXX-NNNN-NN, which will be shown or your ASA homepage.
- You will use your new account only to send Income Tax updates and submit VAT Returns on behalf of your clients. Continue to use your other software and existing Government Gateway IDs for other HMRC online services:
- manage your client lists (not available from your ASA account)
- access other HMRC online services (which you cannot use with your agent services account)
- use the agent services dashboard (previously known as Agent Online Self Service) for your own business.
- You must link your clients to your ASA. This includes your Income Tax clients, for whom you currently hold a 64-8, as well as your VAT clients:
- link each of your agent Government Gateway user IDs to the account – this will link all your existing clients connected with each ID
- invite additional clients one by one – this will link new clients, and existing clients who’ve not yet signed up to use an HMRC online service
- You must then link your MTD-compliant software to your ASA before you can make any submissions. This involves adding an extra layer of security – only one person in your organisation can do this. Identity confirmation will also be needed.
To sign up a client for MTD you will need their email address, not yours, and possibly other information about them. Further information is available on the HMRC website and in ‘Agent Update 66’: https://www.gov.uk/government/publications/agent-update-issue-66
You must delegate authority to the MTD-compliant software, whether it’s new or existing and updated. Details of how to do this will be sent to you with the software update.
When will Prelude be MTD-compliant?
We are aiming to release our MTD-compliant update in February 2019. We will notify you by email as usual and provide detailed instructions in our knowledgebase.
For more information, please see: https://support.preludeaccounts.com/documentation/