The first three MTD steps accountants should take
There’s still a great deal of confusion about Making Tax Digital among accountants. Here are the first three steps to take to be ready for April 2019.
It’s been more than 2 years since the government announced Making Tax Digital (MTD), and there’s still a great deal of confusion among accountants. The goal – bringing tax management into the digital age – makes sense on an intellectual level, but they need clarity on the practical steps required to be ready for HMRC’s changes.
With that in mind, here are the first 3 MTD-related steps accountants should take to get ready for the VAT roll-out in 2019.
Step 1: Re-register as an agent for all your clients
Your agent registration doesn’t automatically transfer over for digital taxation, so this is a box you need to tick when preparing clients for MTD. It’s a similar process to before, just online and replacing the 64-8 form. You can re-register via HMRC directly or via approved third-party software (like Capium). The director then gets a digital activation email, which he or she has to click on to accept. Then you’re good to go.
Step 2: Choose your MTD software
HMRC will not be releasing its own tools for MTD – they’re working with external vendors, who will link into their systems. The government website maintains a list of approved software suppliers for MTD (we’re one of them).
This means you have to choose and deploy accounting and tax software well in advance of April. We recommend that accountants do a pilot quarter if not 2, so you have a clear idea of what’s required to get your clients on board. You don’t want to be firefighting come April – either from the client side or your internal processes – so schedule demos and make a decision sooner rather than later.
Step 3: Communicate with your clients
Clients will need to maintain digital records using MTD-compliant software from the first VAT quarter starting 1 April 2019. Many of your clients will have read about this, but lots won’t know it’s coming. You need to give clients confidence they’re still in good hands – and be clear on what will be expected of them.
You won’t be able to manage digital tax requirements efficiently if you don’t have information from your clients in the right format, at the right time. So let them know that the yearly shoebox of receipts will be a thing of the past, and that they’ll be hearing from you more often.
There’s no question: MTD requires a cultural shift for accountants and their clients
But as with any culture change, this won’t happen overnight. These 3 steps give you a practical starting point, so you can progress towards MTD readiness in a structured, stress-free way.