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Making Tax Digital: How to sign up

Making Tax Digital: How to sign up

Follow on from our article last week on when to sign up for MTD.

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In last week’s Tax Matters Digest we discussed the points to consider before a business decides WHEN to sign up for Making Tax Digital (MTD) for VAT – since publishing that article HMRC have changed their guidance for businesses paying by direct debit so the article has been updated with a footnote*. This week we look at HOW to sign up for MTD as, perhaps surprisingly, this does not happen automatically and instead requires some active steps by businesses within its scope. Groups where one company acts as the ‘agent’ for other group companies (a ‘group tax manager’ arrangement) have an additional step to undertake if they wish to continue with this arrangement.

How to sign up for MTD

The following steps must be followed to sign up to MTD for VAT (NB HMRC are making regular updates to the MTD material on their website so some of these details may change):

  1. Navigate to the ‘Sign up for Making Tax Digital for VAT’ page on the HMRC website and click on the link titled ‘Sign up your business for Making Tax Digital for VAT’.
  2. You will then be asked to confirm you are using MTD compatible accounting software (see more information about this in last week’s Tax Matters Digest).
  3. Sign in using your Government Gateway ID and password. This is the same ID you use currently to submit VAT returns online. If the business doesn’t currently file online you will be prompted to add some additional information such as the VAT registration number, date of registration and business postcode.
  4. You will then be asked to answer a series of questions about the business. For incorporated businesses this will include the company registration number and Corporation Tax unique taxpayer reference number so it is worth having these to hand. 
  5. Businesses signing up during the pilot period are being asked to agree to receive emails instead of letters from HMRC, i.e. to consent to paperless communications. It is understood that HMRC are considering allowing an opt-out for this once MTD is mandatory but not for businesses that pay by direct debit who will always need to provide an email address. Before starting the sign-up process it is advisable to consider which email address would be most appropriate to use. A functional mailbox that will remain in existence as team members come and go may be preferable, particularly for larger organisations. Where an email address is input an automatic message will be sent to it from HMRC asking for it to be confirmed. 
  6. The final step that is required in the pilot phase is to read and accept HMRC’s terms of participation. It is currently unclear whether such terms will remain once MTD is mandatory.

What happens once you have signed up for MTD?

The act of signing up for MTD effectively closes off the current VAT return submission area of the HMRC portal for the business. All the details held by HMRC for the business will move to the new MTD area and if the business tries to submit a VAT return using the old process, ignoring any warning messages that appear, it is understood the return will submit but will effectively be ‘lost’ in HMRC’s systems as they will not be able to match the return to the business. As mentioned in last week’s article, it is therefore essential to submit the final non-MTD return before signing up for MTD.

Additional step for group tax managers

Many groups operate an arrangement whereby one company acts as the ‘agent’ for other group companies, managing the VAT return process and submitting VAT returns on their behalf. It is possible to continue this arrangement under MTD but the group tax manager will need to set up an ‘agent services account’ (ASA) first. ASAs have been designed by HMRC primarily for use by paid agents so the guidance available on the HMRC website about setting up an ASA is not appropriate for a group tax manager – in particular group tax managers are unlikely to have the anti-money laundering (AML) credentials necessary to apply for an ASA online. Instead HMRC have advised groups to contact their Customer Compliance Manager (CCM) in the first instance to ask for an ASA to be set up. Businesses without a CCM should call the VAT helpline. Setting up an ASA does not activate the MTD sign up process, so any businesses that wish to continue with this arrangement under MTD may wish to contact HMRC now to get this preparatory step completed.

HMRC have not provided a similar alternative route for local authorities who currently act as agents and therefore may wish to set up an ASA. Public sector bodies are generally not covered by the money laundering regulations but it appears they may now need to register with HMRC for AML supervision to set up an ASA – no explicit guidance has yet been forthcoming on this point from HMRC.

* Last week’s article, which has been updated by a footnote to reflect changed HMRC guidance for businesses paying by direct debt, can be found here.

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