Signing clients up for Making Tax Digital

We explore how accountants and bookkeepers can sign up clients for MTD for VAT and MTD for ITSA.

Making Tax Digital

Signing up clients for Making Tax Digital

As an accountant or bookkeeper, your clients may approach you to help get them set up for Making Tax Digital (MTD). This quick guide contains everything you need to know about how to sign up clients for MTD.

What is Making Tax Digital?

Making Tax Digital is a government initiative to simplify the UK tax system. From April 2022, all VAT registered businesses need to follow MTD for VAT rules, unless exempt. This means they must keep digital records and submit their VAT returns via MTD compatible software.

When should clients be signed up for Making Tax Digital?

VAT-registered businesses with an annual taxable turnover of £85,000 and over should already be signed up to MTD and be submitting VAT returns to HMRC using MTD compatible software.

By April 2022, VAT-registered businesses with an annual taxable turnover of less than £85,000 will need to comply with MTD for VAT rules, and be signed up for MTD, unless exempt.

By April 2024, self-employed people and landlords with turnover above £10,000 must start using MTD-compatible software to comply with MTD for ITSA.

General partnerships will follow in 2025 and those paying corporation tax will need to comply with Making Tax Digital from 2026 at the earliest. Take a look here for more information on Making Tax Digital timelines.

Can an agent sign up a client for MTD?

Yes, accountants and bookkeepers can sign up clients for Making Tax Digital for VAT through the government gateway. You’ll need to create an agent services account and follow the steps below to sign up clients for MTD for VAT.

You can only sign up clients for MTD for ITSA through your software provider. You’ll need to sign your client up via compatible software, and you can only do this if they’re already registered for self assessment. HMRC has a guide to signing up for MTD for ITSA.

How to sign up a client to Making Tax Digital for VAT

If you’re signing up for MTD on behalf of a client, you’ll need:

  • MTD compatible software
  • An agent services account

You’ll also need the following information from your client:

  • Their VAT certificate
  • Their contact details (including business email address)
  • Business entity type (not required if it’s an overseas business that doesn’t have a UK establishment)

Depending on whether your client is a sole trader, limited company, or partnership, you might need some additional information. Find out more here.

You’ll receive a confirmation email from noreply@tax.service.gov.uk within 72 hours of signing up. You’ll then be able to manage your client’s account and send VAT returns on their behalf through the government gateway.

How to create an agent services account

You can create an agent services account on the gov.uk website.

To create an agent service account you must be:

  • the person responsible for your firm’s tax and administrative matters
  • registered as an agent with HMRC
  • a registered member, if you’re creating an account for a Limited Liability Partnership

How to add clients to your agent services account

Copy across existing VAT clients from your HMRC online services account.

If you want to act for a client that you have not copied across as detailed above, they’ll need to sign up to Making Tax Digital. You can then ask them to authorise you but you cannot do this step for them.

In your agent services account, select ‘ask a client to authorise you’. This creates an authorisation link for you to send to your client. Just make sure they use it before it expires.

Will clients already signed up for MTD for VAT also need to sign up for MTD for ITSA?

Yes. Clients that meet the criteria will need to sign up for both, separately. They can do this themselves, or you can do this on their behalf.

Once your clients are signed up for MTD

  • Ensure your clients are aware of how MTD will affect their tax management going forward. This guide to MTD for small business owners is a good resource to start with.
  • Once they’ve signed up, they must comply with MTD and follow the rules. They must begin digital record keeping and using digital links, even if you file VAT returns for them
  • They should be aware of the MTD penalties that they could face if they don’t comply with digital record keeping.

How MTD compatible software can help you and your clients

The right accounting software for Making Tax Digital will not only help ensure your clients are fulfilling their legal obligations, but it will also allow you and your clients to enjoy the benefits of automation and digitalisation. Xero’s MTD for VAT solution is one of the UK’s most popular ways to submit a MTD VAT return and comes with a roster of additional features to help your clients build a healthy business. Discover how Xero can help your clients or learn more about Xero’s MTD for ITSA software.

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