MTD: How to update and prepare your clients
Della Hudson listened to the HMRC webinar on MTD designed for tax agents, but she was not impressed with the confused and disjointed message it delivered.
An online poll conducted during the webinar suggested that, with less than 12 months to go, 50% of accountants are not confident that they can prepare their clients for MTD. A second online poll indicated that 81% of accountants believe that their clients know little about MTD for business but rely on them. This does not bode well for unrepresented taxpayers.
HMRC clarified that, MTD for business remains a priority and MTD for VAT will be mandatory from April 2019.
Overview of MTD
MTD for individuals consists of:
- Personal tax accounts.
- PAYE with real time triggers.
- Simple assessments.
- Reporting of bank interest directly from banks into personal tax accounts and simple assessments.
The reported pause in MTD for individuals affects the rollout of these services to further taxpayers but it does not affect MTD for business.
MTD for business consists of:
- Business tax accounts - available now.
- Income tax for self assessment for sole traders, and self employed landlords – this will not be live before 2020 but there is currently a pilot for sole traders with income from a single business.
- VAT - due to go live April 2019, but the pilot is at the invitation only stage.
- Corporation tax – this will not be live before 2020.
Business tax accounts contain useful information, whilst taxpayers can access these directly, their agents can only access them through third party software.
Timing and implementation
Businesses which are VAT registered and have turnover above the VAT registration threshold (£85,000) will have to maintain digital records, and send their VAT returns through MTD compatible software, for their first VAT period starting on or after April 2019. Smaller businesses can choose to join the scheme.
Exemptions from VAT MTD are broadly based on insolvency, religion or not reasonably practical, eg remote location, disability, age. We can expect similar exemptions for all taxes.
How to prepare clients and the practice
HMRC’s suggestions for preparing clients are:
- Plan ahead.
- Know which clients must go live with MTD when.
- Inform clients about MTD and their responsibilities to keep digital records.
- Agree how they will transfer digital information to their accountant.
- Make sure the client has accessed their business tax account.
For VAT MTD clients will need to engage digitally with HMRC even if they have a tax agent, as there are some admin tasks the client is required to carry out. The client must have its own email account and confirm that it will receive emails from HMRC, unless they are digitally exempt as described above.
HMRC’s suggestions for preparing your accountancy practice are:
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- Check if your software is MTD compatible or when this is expected.
- Set up your new agent services account (see below).
- Add your clients to this account.
Setting up your agent services account
Any UK based accountancy services provider with anti-money laundering (AML) supervision can have an agent’s service account. Overseas agents can join a trial later this year.
The agent services account (ASA) will enable you to access HMRC’s new online services and to set up your software to communicate with HMRC. It doesn’t replace the current HMRC services which are accessed through the old government gateway as normal.
For each tax you handle as an agent you will have to repeat this exercise:
- Login to any of your current gateways that you use for clients (Note this is the gateway used to manage your clients’ accounts and not own business tax account).
- You will need the your own business’ UTR number for self assessment or corporation tax, and your own business postcode.
You will be given a new gateway ID for your new client services (admin) account. Make a note of your new user ID, gateway agent ID and account number!
You must then:
- Input your existing (old) gateway credentials.
- Input your new agent services account information and agent’s UTR.
- Repeat for every separate gateway id and password if you have more than one.
There should be only one agent services account per agent organisation. You will need it for all new taxes but not to access client accounts directly for which you must use software or clients can use their own access through gov.uk. This will give you administrative control over new HMRC services online and is NOT the same as your current gateway ID(s).
Use the ASA to access all new and existing clients. This single admin for current clients will save them re-authorise you to act for them when dealing with HMRC. If you add new clients after this process the details will be updated automatically. It was not clear whether there will be any delay to this update or whether it is instantaneous.
MTD compliant software
This includes spreadsheets, but it must meet the requirements to send and receive data via API, so spreadsheet users will need bridging software. HMRC will not providing a standard format for spreadsheets, and businesses will need to pay for their own spreadsheet bridging software.
There must be a digital link between pieces of software if the business uses a set of programmes. There will be a soft landing period to update legacy systems, in which penalties will not be imposed. Records must be kept as near to real time as possible as this is more likely to reduce errors. The record keeping can be done by the business or an agent or bookkeeper. Invoices can be kept in paper or digital form ie scanned/photographed.
For current availability of MTD compliant software and bridging software check with your current software supplier or on gov.uk.
You can sign up your clients for the MTD trial from the MTD pages on gov.uk. Sign in with your new agent services account and enter information for your clients. You will need the client’s email address and not the agent’s address for GDPR purposes. It was not clear whether there will be any copy of these communications to the agent (which could cause practical problems as our clients rely on us to deal with these things). Check the box to join the pilot, add their accounting period and method etc. Agree terms of participation on behalf of your client.
Linking MTD enabled software to HMRC will require two step verification through the admin account but this will only need to be relinked every 18 months.
- Talk to your software provider to understand their plans and timescales for software rollout.
- Talk to your clients.
- Sign up for your agent services account.
Della Hudson was part of the class of 2009. She built up Hudson Business Accountants and Advisers from her kitchen table to a small team of flexible workers with independent premises in Nailsea, near Bristol. The firm ran regular Money Matters seminars and other training and webinars. Della sold the firm in 2017 in order to focus on the...