Making Tax Digital for VAT began 1 April 2019. Under the initiative, most VAT-registered businesses with a turnover above the £85k threshold have to keep digital records and file their VAT returns using HMRC-recognised software, such as Xero.
For businesses whose quarterly VAT period started on 1 April 2019, the first deadline for filing returns under Making Tax Digital is 7 August 2019.
Businesses paying VAT via direct debit need to be signed up with HMRC by 29 July 2019.
We recommend you start preparing well in advance of this deadline – particularly if you haven’t set up an Agent Services Account, linked existing agent-client relationships to it and signed clients up to Making Tax Digital.
Follow these steps to ensure you and your clients are fully compliant:
Identify affected clients
As we approach the 7 August deadline, it’s important to identify within your customer base which clients you’ll need to migrate to digital accounting – so you can prepare them for this key date.
Making Tax Digital presents a significant opportunity to migrate desktop software users to cloud accounting software. Moving accounts online may be met by some resistance by some clients, but it’s easy to defeat any concerns when you’re armed with the right information.
Remember our Making Tax Digital for VAT software is available on any Xero plan that supports VAT – at no extra cost and with no updates to install.
If you’re moving clients to Xero, easily convert up to two years of client data to Xero from select Sage and Quickbooks desktop and online products for free with Movemybooks.
We can also help you convert full or partial transactional balances from other accounting software that your clients may be using, including FreeAgent and Kashflow. Find out how on our Client Migration Resource Centre.
For those struggling to convert clients to Making Tax Digital software in time, then Xero’s bridging software can help. It’s available in all Xero plans that support VAT – except for those on the Flat Rate Scheme.
Signing up with HMRC: process and lead times
As an agent submitting Making Tax Digital VAT returns on behalf of your clients, you’ll need to sign up for an Agent Services Account – this process is managed by HMRC and can take up to 10 minutes, assuming you have all the necessary information at hand.
You only need one Agent Services Account for your organisation and you can use this for all new digital services, including ones developed in the future.
Once you create a new account, you can link existing agent-client relationships to it – this can take up to 30 minutes to complete. For more information read HMRC’s guidance here.
When you’re ready to sign clients up to Making Tax Digital, visit the HMRC signup page. It takes roughly 10 minutes per client to sign on and you’ll need to have the following details:
- Your practice’s Government Gateway ID and password for Making Tax Digital services – these are the credentials you generated when you created your Agent Services Account
- Each client’s VAT registration number
- Additional information about the client’s business
- The client’s email address
Alternatively, clients can sign themselves up to Making Tax Digital.
It can take up to 72 hours for HMRC to sign the business up (or seven working days if they pay by direct debit), so leave plenty of time to complete this step.
Remember, the deadline for affected businesses paying VAT via direct debit is 29 July 2019.
How to activate the software in Xero
Once you’ve signed up to Making Tax Digital for VAT with HMRC, you’ll be asked if you wish to activate the software in Xero (this message will appear when you open the VAT return section of Xero).
Remember if the Making Tax Digital for VAT software has already been enabled by another user, this will automatically display when viewing the VAT return.
Those that have signed up with HMRC need to enable the Making Tax Digital for VAT return software in Xero. For more information on how to activate the software in Xero, check out this useful guide.
Those that haven’t should continue to file non-Making Tax Digital VAT returns.
Become compliant with Xero’s Making Tax Digital for VAT software
Xero has been working with HMRC for over three years to ensure you’re supported through this transition to digital tax.
After conducting several pilots and gathering feedback from accountants, bookkeepers, and businesses, we’ve built software that gives you greater control and visibility of your VAT with the assurance of being HMRC-compliant.
It’s available on any Xero plan that supports VAT – at no extra cost and with no updates to install.
You and your clients can benefit from:
- Knowing which VAT returns are due
- Viewing and adjusting VAT returns with ease
- Drilling down to transaction details
- Posting VAT returns securely and in real-time to HMRC
- Viewing history and notes
Become compliant with Xero’s Making Tax Digital for VAT bridging software
For clients using spreadsheets, or with complex VAT requirements, there’s no need to change systems.
All that’s needed to comply with HMRC is Xero’s Making Tax Digital for VAT bridging software – available in all Xero plans that support VAT at no extra cost and with no updates to install.
You and your clients can benefit from:
- Uploading your client’s VAT figures directly from an Excel spreadsheet into Xero in seconds
- Submitting your client’s VAT returns securely and in real-time to HMRC
Xero Making Tax Digital resources
Join our 30-minute webinar to learn all about Xero’s Making Tax Digital for VAT software and how it can help you and your clients become compliant. Our Making Tax Digital experts will also answer any questions you might have.
To help you with the process of communicating with your clients, we’ve developed a Practice Marketing and Communications Toolkit.
Run your own Making Tax Digital event and show your clients what they mean to you. We’ll equip you with all the material you need.
For updates, guidance and resources to help you and your clients, visit our Making Tax Digital Resource Centre.
Gain a greater understanding of Making Tax Digital for VAT with these FAQs – and our answers.
HMRC Making Tax Digital resources
If you experience any problems signing into your Agent Services Account, follow the HMRC guidance here.
Discover Making Tax Digital information and ask general questions on the HMRC Agent Forum.
All of the relevant Making Tax Digital for VAT content – including support videos – can be accessed here.