Elaine Clark has some top tips on how to best tackle Making Tax Digital
Subject to any last-minute announcements, it looks like the first phase of HMRC’s much-talked-about flagship Making Tax Digital project will actually start from 1 April. Greatly ‘dumbed down’, the initial implementation will see those with a turnover over the VAT threshold (subject to the list of exceptions and exclusions) having to complete their VAT returns via a new Government Gateway.
Let’s not make a song and dance about this, though. The only thing that has changed is that there is a new Gateway; no new data is being passed to HMRC at this stage. They still get exactly the same nine boxes of figures as they have always received. It’s a bit like the Emperor’s New Clothes (Hans Christian Andersen) fairy story, where the Emperor spent huge sums of money on new clothes that didn’t actually exist. The elaborate con, pulled off by charlatan tailors, continued until a child questioned what was happening.
All that aside, my advice is not to panic about Making Tax Digital for VAT.
• For clients using software the supplier will make the system changes, if they haven’t already done so. Of course, there will need to be some work undertaken to activate the new link but after that the quarter end processes will be the same as before.
• For clients who use spreadsheets or old versions of software the rush to upgrade to a new system can be avoided by using bridging software. Simply put, this is a piece of software that bridges the spreadsheet to the new HMRC Gateway. There are many suppliers of such software registered with HMRC, with solutions being offered from £20 a year plus VAT. So this is a fast, quick and cost-effective alternative for clients for which there would be no significant business benefit to upgrading to a full accounting system. A great ‘if-it-isn’t-broken-don’t-fix-it’ alternative.
• Clients on manual records will need to ‘go digital’, although there is no definition of what digital actually means and could simply be a spreadsheet.
• The first VAT return due under the new rules needs to be filed by 7 August 2019 for VAT quarters ending on 30 June 2019, then 7 September 2019 for quarters ending on 31 July 2019 and, finally, 7 October for quarters ending on 31 August 2019.
Your MTD4VAT plan
I’d recommend having a Making Tax Digital for VAT plan in place.
1. Start with your VAT registered client list.
2. Check the turnover of clients for those above £85,000.
3. Add in the quarter end dates for each client.
4. Finally, assign a flag to each client to indicate the work involved:
– Green for those already on a system requiring connecting to the new Gateway.
– Amber for spreadsheet users needing bridging software set up.
– Red for those who have manual records.
Your new Agent Services Account
As part of getting ready for MTD, as an accountant (known as Agent in the HMRC world) you’ll need to get an Agent Services Account from HMRC.
HMRC has been a bit sneaky here and introduced new Money Laundering Registration checks on anyone attempting to set up an Agent Services Account. To apply you’ll need your:
• Unique Tax Reference (UTR), either for your company, your partnership or your individual one.
• Money laundering supervisor details your supervisory body’s name, membership number and date membership expires.
The code can be obtained by applying at https://tinyurl.com/y6v8f6e7.
HMRC has been rather ineffective in their communication of the Making Tax Digital for VAT changes. So you may still find many businesses who are unaware of their obligations, what changes need to occur and when.
Effective communications will go a long way to overcoming any uncertainty amongst clients. Assuming that most Practice owners communicate via email I would suggest having at least four standard texts to send to those:
1. Unaffected by the 1 April 2019 changes reassuring them that they do not need to do anything.
2. Using manual systems explaining that they will need to move to digital records, clarifying the timescales and options.
3. Running their accounts on spreadsheets giving the option of either using bridging software or upgrading to cloud accounting. Timescales and costs should be highlighted for each option.
4. Cloud accounting system users explaining that, aside for the initial set up, nothing much will change.
Time to reflect
As you work through your list of clients and send communications to them all, it is worth taking this time to reflect on your engagement with each business. Are you over delivering? Have your fees kept up with the work undertaken? Do you enjoy working with the client? This is a good opportunity to tidy up your client list and recurring fee projections. It’s your business and it needs managing just as much as you would advise a client to manage their business.
And, finally, don’t forget to make sure that your business is ready for Making Tax Digital.
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