Making Tax Digital is the biggest change in UK VAT legislation in recent history and means that since 1 April 2019, businesses with a taxable turnover above the VAT threshold (currently £85,000) have to submit their VAT returns through functional compatible software.
Your clients are obligated to keep digital records of their accounts, which will impact how you service their bookkeeping needs.
We recognise there are accountants and bookkeepers with well-established plans in place for how they’ll get their clients ready for Making Tax Digital.
But there is still a considerable challenge for UK businesses to make the move to Making Tax Digital and prepare for their first MTD VAT return submissions.
Read this article for details on the MTD for VAT timeline, tips on preparing your clients for MTD and advice to help your accountancy practice deal with HMRC’s changes.
Making Tax Digital
HMRC’s Making Tax Digital has changed how businesses submit VAT returns – we’ll help you with it via a free telephone consultation.
Making Tax Digital for VAT timeline
Most VAT-registered businesses must start following the Making Tax Digital rules from the first day of their first VAT period (you can also use our easy-to-use interactive tool to work out when a company’s first MTD for VAT submission should take place).
However, some more complex businesses, entities and organisations have a deferred MTD for VAT start date. This will be the first full VAT period on or after 1 October 2019 and, according to HMRC, it applies to 3.5% of businesses.
HMRC will have written to these businesses to confirm that they have been deferred until October and will be able to participate in the MTD VAT pilot from April 2019.
Businesses that have been deferred are as follows:
- Businesses required to make payments on account
- Annual accounting scheme users
- Not-for-profit organisations that are not set up as a company
- VAT divisions
- VAT groups
- Public sector entities that are required to provide additional information on their VAT return
- Local authorities
- Public corporations
- Traders based overseas
Click on the MTD for VAT timeline image below for more details on upcoming key dates for Making Tax Digital.
4 steps to prepare clients for Making Tax Digital
These are just a sample of the many questions accountants and bookkeepers will face as the race to Making Tax Digital for VAT picks up pace.
What’s clear based on the conversations we have with accountants and bookkeepers is that a roadmap to readiness is critical. To help, here’s a four-step plan to put into play:
1. Make time to plan
Develop a Making Tax Digital strategy for your practice, identify an MTD champion for your practice and review your software options.
2. Segment your clients
What’s their VAT status and scheme, what is their projected turnover and year-end, how are they currently managing their bookkeeping records, how easy or difficult do you anticipate it will be to get them ready for Making Tax Digital? Put the time in to work out these points as this will give you a good idea of the steps you need to take.
3. Communicate to your clients
Make them aware if they’re going to be impacted by Making Tax Digital, market your services and start now.
4. Prepare your clients for digital adoption
Line up your onboarding process, software configuration and training, build in reviews and create service plans for your clients.
How to get your practice ready for Making Tax Digital
Making sure your clients are ready for Making Tax Digital is one piece of the puzzle. What about your practice?
According to research by Sage, at the end of 2018 only 10.5% of accountancy practices were ready for Making Tax Digital.
While that figure is likely to have risen, if your firm is one that’s not ready for HMRC’s new programme, it pays to put plans in place now. We’re here to help you take the steps that are required.
Check out this handy infographic, which has more details on the research and what your practice can do next.
Read more about Making Tax Digital:
- How to submit Making Tax Digital VAT returns for clients
- Making Tax Digital for accountants
- Making Tax Digital for VAT: What do HMRC’s updates mean for you?
- Fast track your MTD plan: A free guide
4 steps to prepare your practice for Making Tax Digital
Here are four tips to get your practice ready, including setting up an Agent Services Account, providing training for your staff, and looking at new packages that you can offer new and existing clients.
1. Set up an Agent Services Account
If your practice is going to submit VAT returns on behalf of your clients for Making Tax Digital, you will need an Agent Services Account. There are four steps that you need to take:
- Start by setting up your new Agent Services Account.
- Move your clients across to your new account using your old Government Gateway details. It’s worth highlighting that you won’t be able to see your clients in your new account.
- You need to state which MTD compatible software you’ll be using for VAT return submissions – this step will take place when you’re ready to start making client submissions digitally and can be carried out via a Gov.uk link.
- You need to add your clients individually to submit their VAT returns. You can split this task across different members of your team – handy to know if you have a lot of clients.
2. Put training on for your employees
It’s important that you and your employees understand the ins and outs of how digital tax works. Having clarity on the basics of Making Tax Digital will help when you’re assisting your clients with any queries they may have.
Set up training sessions with your employees so they have a clear understanding of Making Tax Digital. Then when existing and new clients seek your help, your team is able to offer support and expertise.
3. Keep an eye on your cash flow
The way your practice functions may be changing now that Making Tax Digital has come into play. If compliance and tax are areas your firm focuses on, you might find you’re needing to take on more staff to manage an increase in demand from your clients.
You might even find you’re billing your clients more often when dealing with tax work, which will be good for your bottom line.
However, it’s worth keeping a keen eye on what’s happening with your cash flow – get the balance right so your practice doesn’t get caught short. One way to help with cash flow and revenues is to…
4. Consider offering new service packages
You might be seeing an increase in demand for tax services as businesses seek to stay on the right side of Making Tax Digital.
Look at offering new tax support packages – they could provide specialist tax support that includes advice on complying with MTD and dealing with quarterly VAT submissions. This could be a handy way of creating an additional revenue stream for your firm.
Making Tax Digital toolkit
We’ve created a Making Tax Digital toolkit to help your practice and your clients with HMRC’s VAT changes, including preparing for their first submissions. You can access free tools, advice and marketing materials to help you get ahead, including:
- Making Tax Digital practice pack: Guides, webinars, infographics, product comparisons and a client segmentation template are just a few of the tools we’ve created to help your practice build an MTD action plan for your client base.
- Making Tax Digital marketing toolkit: Download co-brandable and editable email templates with pre-loaded attachments and client guides.
Making Tax Digital is one of the biggest changes to tax legislation by HMRC. We’re participating in the pilot for VAT and have accountants successfully submitting VAT returns to the MTD portal. So we’re compliant and here to help you and your clients with Making Tax Digital.
Editor’s note: This post was originally published in August 2018, updated in October 2018, and has been updated again for relevance.
Fast track your MTD plan
Putting your Making Tax Digital plan in place but need some support to see it through? Read this guide for top tips to help your practice and your clients make the move to MTD.