Get your clients MTD-ready

Jul 19, 2019

By Ed Molyneux

The Making Tax Digital (MTD) for VAT initiative went live on 1 April 2019, but many accountants still need to prepare their clients for the change and implement a viable, long-term plan of action. Here’s five top tips for getting your clients MTD ready.

1. Move to the cloud

Migrating to a cloud accounting system is an opportunity for your small business clients to modernise their record keeping, simplify their finances and cut down the time spent on admin. It’s also an opportunity for accountants to take advantage of the latest technology, improve their workflows and boost growth within their practice.

If your practice and all of your affected clients are already using cloud accounting software to submit VAT returns, you still need to ensure they’re ready to file their VAT returns through MTD instead. To do this, you will need to set up an agent services account with HMRC and, if you’re planning to file VAT returns on behalf of your client, ensure that they have granted you permission to do so.

2. Segment, then contact your clients

Not all of your clients will need to adapt to MTD for VAT, so it’s important to segment your client base in order to determine who is affected. Your first action should be to identify all of your clients with VATable sales above the VAT threshold (generally taxable supplies of £85,000 per annum). Next, identify which of your remaining clients may be approaching the VAT threshold soon, and are therefore likely to be impacted. Finally, if any of your clients already use cloud accounting software for VAT return filing, keep them in a different segment.

You’ll also need to know when each client’s VAT period ends, so you’re aware of when they need to be compliant with MTD regulations. You may have already reassured clients that are not registered for VAT that the upcoming MTD for VAT changes don’t apply to them; however, it’s still a good opportunity to advise them to adopt cloud accounting software to make both of your lives easier and prepare for the full MTD rollout.

Clients will generally fall into four categories:

  • VAT-registered clients who are already using cloud accounting software;
  • VAT-registered clients who are not yet using compliant accounting software;
  • clients who are using accounting software but are not VAT registered; and
  • clients who are not yet using compliant accounting software and won’t be affected by MTD until at least 2021

You’ll need to get in contact with each of these groups to let them know what they need to do to prepare for MTD.

3. Educate your clients

Your clients may not know much about MTD or cloud accounting software, so once you’ve got in touch to let them know about the legislation, the next step is to start educating them about the process.

The most straightforward way of doing this is to highlight the benefits of using cloud accounting software, including control over finances, recurring invoices, 24/7 access to data and useful reporting features. You’ll need to make a recommendation on which cloud accounting software would be best suited to your clients’ businesses and their needs. Advise and teach your clients to learn how to use the software sooner rather than later so that they have time to resolve any issues.

4. Copy your clients to your agent services account 

The agent services account is the one you use to access the majority of HMRC online services when MTD rolls out – this is different to the Government Gateway account. This is the account that you’ll link to your chosen accounting software in order to comply with MTD.

In most cases, in order to copy a client to your agent services account, you’ll need their:

  • VAT registration number (VRN)
  • Company registration number (CRN)
  • National Insurance number (NINO)

In order to copy your affected clients, they will have to confirm that they can be added to your account from their own HMRC online account. You’ll then be able to send them an invitation to do this. New clients and clients who have not yet given permission will need to provide authorisation for you to submit returns on their behalf.

5. Reconsider your pricing

Last but not least: pricing. MTD is a great opportunity to bring on new clients, but it’s also a good time to update your existing services and review your pricing. New regulatory changes mean that the majority of accountants will, unsurprisingly, look to move towards a monthly rate, as this offers greater transparency for clients. Monthly fees are also easier for practices to manage, relieving staff of manual invoicing and billing tasks.

Ed Molyneux is the CEO and Co-Founder at FreeAgent.