Money Matters

Registering for Making Tax Digital for VAT: What accountants and clients need to do

The MTD for VAT registration process needn't be difficult. Discover what information clients need to supply and how to set everything up.

Making Tax Digital is here to stay.

For tens of thousands of VAT-registered businesses across the country that were previously out of scope, they need to be registering for Making Tax Digital (MTD).

Essentially, these individuals and businesses voluntarily signed up for VAT but didn’t sign up for Making Tax Digital for VAT.

As an accountant, you can help with everything from understanding the requirements of MTD for VAT to implementing new processes or technologies.

And we’ll help you do that with this article.

Here’s what we cover:

The Making Tax Digital for VAT registration process

One of the first tasks for accountants is to segment clients into lists. This segmentation will define the amount of work and input required—from any initial education about MTD for VAT through to day-to-day responsibilities.

Included in this are considerations about how the client will register for MTD for VAT.

When creating your lists, consider whether the client prepares their own VAT Returns or asks you to do it for them.

Leading on from this, clients will either have to register themselves for MTD for VAT or have you do it for them via your agent services account.

You should be able to copy existing clients across from your online services for agent account.

If the client signs themselves up for MTD for VAT, you’ll need to ask them authorise you. This can be done within your agent services account via the ‘Ask a client to authorise you’ option.

This will provide a link that you can then send to the client.

What information do clients need to supply?

If it’s not possible to transfer clients from the older online services for agents system, and the client wants you to file their VAT Returns for them, you need to sign them up using your agent services account.

To do so, you’ll need to input the following details, some of which you may need to request from the client (or verify for accuracy):

  • VAT certificate
  • Business type
  • Contact details
  • Their business email address
  • For sole traders: National Insurance number
  • For limited companies or registered societies: Company registration number and Unique Taxpayer Reference (UTR) for corporation tax
  • For limited partnerships: Company registration number, UTR and the postcode for where they are registered for Self Assessment
  • For general partnerships: UTR and the postcode for where they are registered for Self Assessment.

3 steps accountants should take to set up their clients

Here’s a suggested list of steps that should demystify the process of signing up VAT-registered clients.

  1. Education: The relevant clients need to know that Making Tax Digital for VAT applies to them. Some of them might be surprised at the suggestion, and may cling to the belief that they’re outside the scope. Therefore, your communications need to make it clear that the rules have changed, and that the client needs to take action.
  2. Registration: Create segmented lists to ensure your clients are registered for MTD for VAT. And make sure resources are allocated within your practice as part of this.
  3. Processes: Clients need to understand how MTD for VAT affects their accounting processes. For example, those that rely upon you to file VAT Returns might incorrectly believe they need do nothing more. But if they aren’t storing their key VAT accounting records digitally, they’ll be in breach of the law. Furthermore, you’ll need to find a way for the client to either get their data to you, or make it accessible, in ways that are compatible with the digital linking provisions within MTD for VAT. The good news is that tasks such as emailing a spreadsheet or even handing over a USB memory stick don’t break the digital linking rules.

How to work with your clients for a smooth move to MTD

Since most accountants are now very experienced with MTD for VAT, there’s a risk they may not appreciate or even understand the scale of the Making Tax Digital challenge for clients that are new to it.

For many who have relied on manual accounting processes, the switch to using software and keeping records digitally may seem like a mountain to climb.

The key to a good client relationship is not just to educate clients and help them redefine their processes so they’re compliant.

It’s also to explain the positives and benefits behind Making Tax Digital.

Using MTD-ready accounting software delivers a multitude of benefits, for example, beyond simply compliance with the rules of Making Tax Digital.

It makes it easy for clients to create documents such as quotes and invoices, and to reconcile payments they receive. They’ll always know where they are with their cash flow, and so can spot problems well ahead of time—as well as opportunities.

If they want to save for a capital expenditure such as equipment or a vehicle, knowing their financial position through software, and being able to compare it to the past, makes it much easier.

Add in the automation tools of modern accounting software and clients can save days, if not weeks, of admin time.

This time can then be spent on building the business.

Discover how automation can help improve efficiency with this ROI calculator.

And none of this is to mention how you can provide a better service to them if you link their accounting system to yours. This allows you to provide better value and be more of an essential partner to them.

In other words, the message is that MTD for VAT is something that’s ultimately empowering, rather than a drag on time and resources.

Final thoughts on registering for MTD for VAT

Making Tax Digital for VAT’s final push might present challenges to you and your clients.

But with a little preparation work, the task should become significantly easier.

Editor’s note: This article was first published in February 2022 and has been updated for relevance.