As by now you will know, Making Tax Digital for VAT went live on 1 April 2019. But, what does this mean? What steps should you now be taking to ensure you keep on top of the MTD timeline? What do you need to tell your business clients to help them?
MTD has gone live, which actually creates a number of questions, and there are many points to consider. The timing of the next steps is crucial.
For those businesses caught by MTD for VAT, there are two basic elements to consider; the need for digital record-keeping, and secondly the submission of VAT return information to HMRC via software. For clarity, 1 April 2019 is the potential start date for digital record-keeping. Most VAT businesses report quarterly, and their effective start date is the first VAT period starting on or after 1 April. This means most affected businesses will be within the MTD regime from either 1 April, 1 May, or 1 June 2019, unless otherwise exempt or deferred to later in the year.
When to sign up for MTD
However, despite this need for digital recordkeeping, it is imperative that businesses don’t register for MTD for VAT just yet, as there are implications which may be unforeseen if you register too soon. So, when should your clients’ sign up to MTD? It depends on whether they are monthly or quarterly filers, and which period is their first mandated submission. Importantly, you should not try to sign up until your last “old style” VAT return is submitted, otherwise you may sign up for the pilot, with the need to submit any outstanding periods via the new MTD process.
Assuming neither you nor your client is taking part in the pilot, and the client is not otherwise excluded/deferred, the first MTD period is 1 April to 30 April 2019. This is due for submission by 7 June at the latest. HMRC recommend that the business signs up for MTD between 15 May and 28 May.
If your monthly client wants to join the pilot to submit the March monthly return, then the sign-up period is 15 to 22 April (with the return due by 7 May)
Depending on stagger, the first date due for submission will be either 7 August, 7 September or 7 October. The respective sign up periods are 15 May to 23 June, 15 June to 23 July, or 15 July to 22 August.
These sign up periods are given by HMRC, and must be observed by direct debit payers. However, if your client is a non-direct debit payer, they can sign up 24 hours after your last ‘old’ return has been submitted.
If you and your quarterly client want to join the pilot, then the sign-up periods are as follows;
• For stagger 1 clients (Quarter 1 January to 31 March), the sign-up period ends on 25 April
• For stagger 2 clients (Quarter 1 February to 30 April), the sign-up period ends on 31 May
• For stagger 3 clients (Quarter 1 March to 31 May), the sign-up periods ends on 28 June
How to sign clients up for MTD
Hopefully by now, you have created your Agent Services Account and linked it to your existing Government Gateway accounts, which is the first step needed before being able to submit MTD data to HMRC.
It is important to note that the sign-up for MTD for VAT is not automatic for a VAT registered business. Either your client, or you on their behalf, must go through the process of “onboarding” into MTD – it will not happen automatically.
As an accountant, once you have your Agent Services Account, the process is relatively straightforward. Log into your Agent Services Account, click on the link to access client details, and go through the process of confirming which client you are onboarding (provide the VAT registered number), and then within 72 hours the new MTD record will be created for the client by HMRC. Onboarding is on a client by client basis.
Further information on these steps can be found by going to HMRC’s website, going to “Making Tax Digital for VAT”, and then click on “For agents”.
The future of Making Tax Digital
In my recent blog I suggest that other taxes are still likely to be delivered, but the next tax to be mandated is not going to be before 2021.