HMRC removes VAT for Agents from Online Agent Authorisation service

HMRC has announced changes to the Online Agent Authorisation service that will affect you and your VAT clients.

The removal of VAT for Agents from the service means you may have new processes to implement.

In this article, we highlight what’s changed, what it means for your practice and your processes, and how you can prepare your clients.

Here’s what we cover:

• Why has HMRC removed VAT for Agents?
• What is a digital handshake?
• What the changes mean for accountants
• What the changes mean for your VAT clients
• 5 steps for accountants to take now
• Final thoughts

Why has HMRC removed VAT for Agents?

If you’re representing your clients as an agent, you have access to numerous online services from HMRC.

However, some are coming to the end of their lifespan – and VAT for Agents is one of them.

HMRC wants to “make using online services simpler” and improve consistency across all areas of work, so the decision has been made to move functions from legacy services to just one point of access, the agent services account (ASA).

The ASA has been around for some time and has been the flagship route for agent authorisations for VAT since the introduction of Making Tax Digital (MTD) for VAT.

So it stands to reason that the legacy route via the Online Agent Authorisation service would be deprecated at some point.

Therefore, since 16 February 2024, as an agent, if you want to be authorised to represent your clients for VAT, you have to do this in your agent services account.

(Also, since this date, you can no longer copy across VAT for Agents authorisations created by the Online Agent Authorisation service to your ASA.)

According to HMRC, the VAT for Agents authorisation process in the ASA involves a ‘digital handshake’.

What is a digital handshake?

A digital handshake is the process you need to follow to get client authorisation to transact on their behalf.

The first step is to create an agent services account, if you haven’t already got one.

Next, you need to get client authorisation.

To do this, you need the following:

• A Government Gateway ID. This needs to be the one you received when your agent services account was created
• The client’s National Insurance number
• The date of birth of the client
• The client’s tax reference number – this has to be for the service you’re looking to get authorised for.

There are three stages when using the digital handshake to get authorised.

You need to:

• Sign into your agent services account
• Choose ‘Ask a client to authorise you’
• Enter your client’s details.

Once complete, your client will be added to your authorisation requests.

There’s the option to add more clients if you need to. But if not, you can move on to complete the process.

This is the stage where you’ll receive an authorisation request web link.

Copy it and give it to your client.

Ask them to select the link and respond to the request. This will involve them using the Government Gateway ID they used to register for the tax service.

They have 21 days from the date you generated the link to complete this task, otherwise the link will expire and you’ll have to start the process again from the beginning.

It’s probably best to ask your client to action this straightaway. Don’t hesitate to follow up if required.

What the changes mean for accountants

Since 16 February 2024, when it comes to VAT authorisations, you need to use your agent services account.

If you’re already doing this, you don’t need to change your processes.

If you’ve been using VAT for Agents via the Online Agent Authorisation service, HMRC requires you to move to the new process.

If you generated any VAT for Agents authorisation codes using the Online Agent Authorisation service prior to 16 February 2024, you must ensure they’re used by before 18 March 2024.

Additionally, if you started the process of using the Online Agent Authorisation service to represent a client for VAT but didn’t take the step to copy your client over to your agent services account by 16 February 2024, you may have to follow the digital handshake process so you can act for them.

If you need to check which clients you’ve previously authorised, you can still use you VAT legacy account.

What the changes mean for your VAT clients

The main change for your clients, when it comes to VAT authorisations actioned via your agent services account, involves the digital handshake.

Their role will be to use the web link to complete their required steps of the digital handshake process and they’ll have 21 days from the time the link was generated to do so.

If they fail to complete it within this timeframe, the link will expire and you’ll need to start the process again.

5 steps for accountants to take now

1. Remove VAT for Agents from your processes

You need to move to the new ways of working now, so it’s worth updating your processes to reflect that.

2. Create an agent services account if you’ve not got one

This is essential for the new process. Go to the Gov.uk website and follow the steps to create your agent services account.

Your first step here will be to register with HMRC as a tax agent.

3. Familiarise yourself with the new digital handshake process

We’ve covered the details above but it’s worth you personally running through the process now so you’re clear on what’s required and you’re not struggling with it after 16 February 2024.

4. Inform your team

Let your practice team know about the changes so they can make the necessary updates to their processes.

5. Let your clients know

You might opt to do this now, via a call to your clients, contact via email or a newsletter, or in your next client meeting.

The alternative is to raise it when you need to go through the VAT authorisation process with them.

As you follow the digital handshake steps, be sure to make your client aware of the deadline for them to complete their part.

And chase them if necessary, so you don’t need to start the process from the beginning if the digital handshake web link expires.

Final thoughts

With HMRC removing legacy services and simplifying its online services, changes such as the removal of VAT for Agents should make your life easier in the long run.

However, you’ll may need to change your processes in the short term to adhere to the new ways of working.

Taking the time now to set up an agent services account and understand how the digital handshake will put you in good stead when the time comes to deal with any VAT authorisations.

Editor’s note: This article was first published on 8 February 2024 and has been updated for relevance.