Why aren’t firms signing clients up to MTD for VAT?

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Practitioners are still dragging their heels when it comes to signing-up clients ready for this month’s official launch of Making Tax Digital for VAT.  So why aren’t accountants eager to get clients involved?

AccountingWEB members turned out in Spartacus-like numbers to identify themselves among the majority uncovered in a recent FOI request by Float that found that only 2% of accounting firms had registered clients ahead of 1 April MTD for VAT ribbon-cutting.

Responding in the article’s ever-expanding comment section, practitioners expressed frustration about HMRC’s systems and communication. In the words of Elvis, Glenn Martin said that at this early stage, “Only fools rush in.”

VAT start date

Rather than circling 1 April on their calendars, practitioners are working more towards the end of June. “Unless I'm missing something anyone with a VAT quarter of March 2019 who signs up now will have to file the January to March return using MTD when it doesn't become compulsory until their June return, so why would they want to sign up now?” commented AccountingWEB member GW.

“They need to keep digital records from 1 April, but they don't need to register until later.”

Given the House of Lords' pushback and the frustration voiced on Any Answers from members grappling with the Agent Services Account, accountants like Jon Griffey are not prepared to deviate from their normal VAT dates: “We have heard much wailing and gnashing of teeth on here from agents who have signed clients up early, and the impression is HMRC is fixing the MTD system on the hoof. Best let others waste time whilst it is straightened out.”

Similarly, Glenn Martin was unsurprised by the sluggish sign-ups: “Was anyone expecting 2m businesses to be chomping at the bit on 1st April waiting for this new filing system to be ready?”

Though Martin’s clients are ready for the rollout, he is not jumping in just yet: “My first return won’t be submitted until 7 August so will let others iron out the issues in the system first (I am sure there will be plenty of those) before I dial into it.”

The same goes for Mr Mischief. Considering the uncertainty surrounding Brexit, which has already held up dispatch of self assessment penalties and news from the pilot, he’s going to continue using the “Just In Time project management” that he’s used for the last two years on MTD.

AML registration delay

For others, it’s not a case of why aren’t they signing up clients, it’s more of when can they. Since you can’t sign clients to MTD without having an AML registration in place, practitioners like SXGuy are waiting for their registration to be approved.

“Those that for whatever reason have had to register with HMRC AML supervision in recent months will know that the 45-day waiting period is a laughable joke. So what happens to those who perhaps registered with HMRC within the time they specified only to find out that come April 1st the decision is still pending?" they asked. 

MTD awareness

While some are still cagey about HMRC moving the goalposts, the April launch has nudged members into reviewing their client lists and categorising which clients need to adhere to the MTD rules.

“I did a check of my clients who would be affected and sent them round a one-page note because I thought that they would view the QuickBooks adverts on the TV and wonder what it was all about,” said Jennifer Adams.

While she assured her clients that all was in hand and confirmed their start quarter, she stopped short of signing them all up. “Like others here, my first one is to 30 June and we have been told that if you signed up then the next return would have to be submitted via MTD, which for many is 31 March.”

The lack of client knowledge has caused practitioners to question HMRC’s pre-launch communication. AccountingWEB member Davey Jones Locker reported that less than 10% of his clients who were registered for VAT and above the threshold have received notification letters. Hardly of GHarr497688’s clients have received a letter and most know nothing about it. “Shambles is an understatement,” they said.  

Trust in HMRC

That’s why trust in HMRC’s systems is a roadblock for many. In one example, AccountingWEB member Jdopus’s tried registering a single client to test the system worked, but things didn’t end well.

“The webpage immediately froze as I tried to register them for MTD and it was impossible to proceed any further. If this isn't fixed by the time April returns are due, there are going to be an awful lot of people without any way to submit VAT returns at all.”

Passions clearly flaring, GHarr497688 has far stronger words on this matter: “I’m signing no one up to a system that clearly is in chaos. No one understands HMRC’s ASA portal or the software that’s provided. I will write to HMRC and they can put me in prison. It would be far less stressed than I am now.”

About Richard Hattersley

Richard Hattersley

Richard is AccountingWEB's Practice Editor. If you have any comments or suggestions for us get in touch.

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By CJaneH
08th Apr 2019 18:05

As a one person practice change is usually a nuisance. I have been following Aweb posting. Seems lots of people are struggling to enrol themselves, their clients etc.
I just do not feel like starting.

We were told that it was to improve the tax collection but as in small businesses' I would suggest that the loss of tax will be unregistered businesses' as those intentionally under-declaring takings I can not see MTD will help at all.

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to CJaneH
08th Apr 2019 19:55

As ever people who abide by the rules get caught up in this sort of thing and I agree that corrupt people will go under the radar .

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08th Apr 2019 20:25

I decided to use my own firm as a guinea pig for understanding the process.

Presently my firm is has been migrated but HMRC's records are not talking to Quickbooks' records as the submission quarters all of a sudden do not tally. This is because "HMRC have not yet sent the records to Quickbooks for the next open return."

And no, I don't know what that means either.

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08th Apr 2019 21:23

The HMRC's software is the same for all suppliers and I am not aware of any situation where if a correct request is sent to them for obligations the correct response is not sent.

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09th Apr 2019 08:55

The simple answer is because we aren't unpaid beta testers for HMRC's hair brained half baked schemes.

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09th Apr 2019 09:12

This is going to go very wrong. As a one person business even 10 minutes spent on MTD or looking at products to buy or on the phone to HMRC is 10 minutes I don't have. I am going to wait to see what happens eg if I can file the next VAT return as now and just get gentle warnings from HMRC for a year I will just put it all off. If instead they slap on a £100 fine I might start thinking about looking at software although I am very wedded to my perfect paper records so I will certainly have to run both in tandem until I am sure any new software actually works.

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09th Apr 2019 10:02

So, the big question is:
"If I (or my clients) continue to file using the existing system after the first MTD return is due, what are the penalties in the first year?
(assuming VAT continues to be paid in the usual way)

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to memyself-eye
10th Apr 2019 17:48

Yes. Initially HMRC was saying they would switch off the ability to pay VAT as now (which would have been a bit of an own goal for them) so now I think they will keep the current portal open (as so many people are exempt or delayed anyway) so presumably they will issue a series of warnings and then ultimately fines. I am giong to hang on for now with my lovely familiar paper records and see how it goes. I don't even want to start reading a list of 200+ software providers. I am too busy working hard to pay my tax!

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09th Apr 2019 10:10

As I understand it the current portal will be suspended for those clients who have a turnover in excess of £85k from the next quater ens. It was also suggested that this will be calculated at 4 x last submission figures.

I am at a loss as to why have HMRC made it so difficult to move over. Surely the best option would have been to automatically switch over current clients and then impose the "new requirements" after that date.

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By dl100tr
to pauljohnston
09th Apr 2019 10:18

This is going to be problematical - how is HMRC going to know that the requirements have been met for signing up to MTD? In another thread on this site there has been discussion about the fact that the Box 6 figure has to contain figures of sales/turnover that do not count towards taxable turnover for MTD (exempt & outside the scope figures for example).

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to pauljohnston
09th Apr 2019 10:20

Thankfully, I don't believe you have understood correctly. The portal will be suspended for those businesses who have signed up for MTD, and not for anyone else.

Presumably, when they get around to it, HMRC will start chasing those businesses who should be filing under MTD but aren't, but since the likely result of forcing people who aren't ready into it is a loss of revenue for HMRC, it would be foolish of them to cut people off.

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to Duggimon
09th Apr 2019 13:23

I am not sure where you get the idea that the portal will be suspended. That is not my understanding.

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to johnhemming
10th Apr 2019 11:40

Businesses who sign up for MTD will no longer be able to file their VAT returns through the existing portal. That's what I mean by suspended.

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to pauljohnston
10th Apr 2019 17:49

That is the crux- HMR originally said they might but I don't think they really can so I certainly won't be rushing to register.

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09th Apr 2019 12:05

I just tried (AGAIN) to register a single client for MTD and got a 'Bad Gateway' error message. Tried again using another browser and the same thing happened - fantastic!

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09th Apr 2019 13:16

The reason why so few have signed up for MTD is because you shouldn't sign up until after you've submitted your last non-MTD return. For some businesses that will be as late as 7 July. I've just taken on a new client who accidentally signed up for MTD before submitting their 31 March return. They now have to send their 31 March return through MTD but their software isn't yet MTD compatible. I'm certainly not signing anyone up for a few months yet.

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09th Apr 2019 13:17

Re the ASA mess, because we can't see our clients how do we know who has signed up?

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to kevinringer
09th Apr 2019 19:26

kevinringer wrote:

Re the ASA mess, because we can't see our clients how do we know who has signed up?


Exactly! This is the biggest problem and the greatest source of stress. If HMRC showed us the list of clients that had been migrated into the ASA (whether or not they had yet been registered for MTD), we'd at least have certainty that the client's records were correctly linked to the ASA and then, presumably, we'd just need to register each of them individually for MTD within our software (eg QBO or Xero). But, we don't really know if this will work, because HMRC have made a dog's dinner of the process, leading to confusion even amongst the most diligent of professional advisers.

Assuming that we have no desire to use MTD before required (due to teething problems), we won't want to sign any client up to MTD until we have filed the returns for quarters ending in March, April or May. So the earliest that we'd want to sign up any client is once the March quarterly VAT return has been filed (anytime from 1st April to 7th May). The latest that we need to register for that same client is 7th August.

I believe that I have correctly set up my ASA and migrated my clients (well, at least it lets me log into the ASA, so I assume that I've done it but, without a list of clients there, how on earth can I be sure?). I can only be sure once I start to register each client individually for MTD. If it works smoothly, then that'll be a wonderful surprise. However, if it doesn't work, I'm not sure how I'll know whether I have (i) not correctly set up my ASA or (ii) not linked my full client list to my ASA or (iii) not registered the client correctly for MTD.

I intend to test the process on my first client sometime in May, so as to allow plenty of time before 7th August to seek advice when it all goes Pete Tong. I have very little faith that this will work first time. After all, it took me three or four attempts some months ago to even set up the ASA, despite doing that immediately after watching an HMRC webinar and following the process to the letter.

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to charliecarne
10th Apr 2019 09:53

I had the same problems and at the moment am lost with it all . I have about six clients struggling to make migrate books from manual to computer . It’s an awful situation to be in . Wrote to Mel Stride and he answered with the usual this is good for everyone !

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to charliecarne
13th Apr 2019 10:28

Charlie - a very good summary - similar to my own experience. I decided to make my accountancy practice the guinea pig for MTD. I got no confirmation of the ASA being set up or the linking of the clients being successful. As you say you can't see a list of clients once this is done. I phoned HMRC and was told only that the facility was not yet available. This is gross incompetence.

If you login to a client through the old ASA, there is a warning that VAT Returns for those registered for MTD cannot be submitted through that portal. When submitting my practice 31st March VAT Return, there was no confirmation received, so I logged into my practice Government Gateway account and the figures were there, but not on the front page where the Corporation Tax and PAYE where showing. I had to click on another link. Lousy design.

Back in the ASA account there was nothing to indicate anything had been done. Because I have access to my Government Gateway account, I can check what has been done for my practice, but I won't be able to check my clients. Disaster awaits.

When signing up the practice for MTD, I had to enter the Box 5 figure, the VAT number, the VAT Post code, the quarter end of the last VAT Return. I now have to motivate every clients to get on and do this via a Government Gateway account that most have never logged into. Apathy rules and it will take considerable effort to get this done.

To say I am unimpressed is putting it mildly.

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to kevinringer
09th Apr 2019 19:53

This is a serious problem . Hmrc seem to think we have telepathic powers .

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By djtax
09th Apr 2019 17:44

Despite HMRC boasting a large number of taxpayers being now signed up for MTD I think I read somewhere that only 20,000 or so have actually filed a return on MTD (no doubt all those who have signed up just in the last month or so have not yet got to the point to actually submit their first return under MTD). With over 1 million businesses affected HMRC have seen nothing statistically significant yet. Who knows what chaos may ensue when the volume of submissions suddenly increases substantially in a few months time?

NB I am still waiting for my own firm's letter from HMRC notifying me of my obligations under MTD with effect from 1/4/19....

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10th Apr 2019 13:28

Re all the discussion about ASA, HMRC created the GG account 20+ years ago. The GG wasn't perfect but that at the time it was a giant leap compared to what happened beforehand. Given HMRC got it so right 20+ years ago, how can they get it so wrong now? It proves one thing: HMRC valued agents 20 years ago and knew we were crucial to the smooth running of the UK tax system but today HMRC is trying to cut us out and really doesn't understand what we do.

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10th Apr 2019 16:05

As a software developer, I know all too well that new software can have a few bugs and issues - no matter how stringent the Q&A process was.

All Making Tax Digital software (whether it is standalone bridging software, an Excel implementation or an accounting package integration), is brand spanking new and barely tested in the wild.

So, the relative infancy of MTD software solutions is another reason not to register for Making Tax Digital until you absolutely need to.

When you're ready though, please consider my bridging software solution - Easy MTD VAT - which you can download at https://easymtdvat.com

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to EasyMTDVAT
10th Apr 2019 16:37

It's not necessarilly the end use software that is the issue, but rather the ill-conceived APIs forced out by HMRC, and the complete lack of functionality within the ASA that are likely to be driving the accountancy industry's reluctance.

If HMRC had thought it through properly, listened to consultations and engaged meaningfully with the profession then they may have found more enthusiasm.

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to SteLacca
10th Apr 2019 17:10

Indeed, the API didn't make things easy and neither did the test users HMRC supplied. With a large part of software testing only being achievable within HMRC's sandbox environment, there will inevitably be issues cropping up as more and more live users are dragged through the MTD grinder.

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16th May 2019 13:21

I started up a new business I have very few clients at the moment but did set up an agents account on the old system, I applied for AML back in February and to date have nothing, I currently have one vat client and did their return on the old system. I have no idea how long they are taking to do AML registrations at the moment but mine has been to date about 90 days and still waiting..

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to Psychic Sue
18th Jun 2019 16:55

HI,

Have you had anything from HMRC yet? I am in a similar position. I need to complete the clients VAT return for the period ending 31/08 and I am worried that I wont have received my AML number. I applied on 31/03 and still heard nothing...

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