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HMRC MTD Updates for Agents

By Sharon Cooke

HMRC has started issuing a regular MTD newsletter for agents but not all agents will currently be receiving them. If you are not currently receiving a copy and would like to, you can opt in by emailing makingtaxdigital.mailbox@hmrc.gsi.gov.uk.

Below is a summary of the key news items shared so far:

Issue 1 – December 2018

- Pilot for partnerships and users of the flat rate scheme now open.

- Letters are being sent to all MTD mandated VAT customers. 200,000 letters have already been sent and roughly 20,000 more are being sent each day. 

- Reminder of the available stakeholder communications pack (makingtaxdigital.mailbox@hmrc.gsi.gov.uk)

- Some myth busters as follows:

  • The existing HMRC VAT portal will close in Apr 19. This is incorrect. The existing portal will not close in April 19. The portal must remain open for businesses voluntarily registered for VAT that are under the VAT threshold. The new rules only apply to businesses over the threshold, although those under the threshold can join voluntarily.
  • 2 million businesses are mandated under MTD VAT. This is incorrect. There are around 1.2 million businesses with a turnover above the VAT threshold who are mandated under MTD VAT. 
  • MTD for VAT is being postponed. This is incorrect. A very small proportion of the mandated population have been deferred until October 2019. 
  • MTD requires a cloud based software package. This is incorrect. MTD requires digital record-keeping and submission of the VAT return data via third party software, but that software does not have to be cloud-based. 
  • Spreadsheets are not allowed under MTD. This is incorrect. If you or your client use spreadsheets to keep business records you’ll need MTD-compatible software to send HMRC their quarterly VAT returns and receive information back from HMRC. Bridging software may be required to make spreadsheets MTD-compatible.”

- Pilot issue & subsequent fix. HMRC say:
HMRC have been seeing some customers who have joined the VAT pilot continuing to file their VAT returns through legacy channels; the HMRC VAT portal and through the third party XML channel.

In some cases this is because the agent or businesses is already using software but either hasn’t got the MTD version or hasn’t ‘switched on’ the MTD element of it.

To help customers get it right we have placed message on the VAT portal, updated our guidance and changed the sign up journey, adding two new questions to ensure people have MTD software in place: 

  • “Do you have accounting software for managing your VAT records?” The required answer is yes or no. If they select ‘no’ they are advised to get software before signing up, cannot continue and are directed to the software suppliers pages on GOV.UK 

  • Answering ‘yes’ to the first question takes you to question two - “Is your software ready to submit your MTD VAT Returns directly to HMRC? If ‘no’ is selected here they are again directed out of the sign-up journey and asked to speak to their software provider.”

- Top 5 Agent Questions on MTD
Again, to quote the newsletter:

“1. I’ve set up my new Agent Services Account but can’t see a client list
This is correct. You won’t be able to see a list of your clients in the new account after you have linked them – or added any new clients. But once you have signed up each client for MTD for VAT the client may appear on a client list in your commercial software to give you access to your clients data. But this will depend on what sort of software you are using for your firm. 

2. What do I do now I’ve linked my clients to my new Agent Service Account?
You need to register your software and sign your clients up to MTD. This is stages 3 and 4 in the process described in Agent Update 69.

3. Do I need to sign my clients up individually for MTD?
Yes, or they can do it themselves. 

4. Where can I get help if I get into difficulties setting up my new Agent Services Account?
At any point in the process, if you get stuck, you can use the “get help” function available at the bottom of each page. This is the most efficient way for you to report issues and for HMRC to respond. This is because it pinpoints at which stage the issue occurred and we can quickly rectify the problem or give our technical team the right details to investigate. 

The Agent Helpline (0300 200 3311) can take your calls regarding MTD issues. If you quote MTD and Agent Services you’ll be sent to the right team to help you through the process. 

5. Do I need new 64-8 forms for my clients?
No, you add your existing client relationships to your new Agent Services Account so that you don’t have to re-authorise all the clients you hold relationships with for VAT.” 

Issue 2 – January 2019

- Every business affected by MTD (with a 1 April 2019 start date) should receive a letter by the end of February 2019.

- The majority of customers affected by the deferral to 1 October 2019 should have already received a letter. The exception is those businesses based overseas and HMRC plans to contact them over the coming weeks. If a business is expecting a deferral letter but hasn’t received one they are advised to contact the VAT Helpline on 0300 200 370.

- Reminder not to sign up to the pilot until ready and have submitted the final VAT return under the legacy route.

Guidance on setting up the required new Agent Services Account (ASA) (see - https://www.gov.uk/guidance/get-an-hmrc-agent-services-account)

- You will be able to use your new ASA to act on behalf of your client to:
1. Submit VAT returns
2. Change your client’s business details for VAT
3. Send Income Tax Updates as part of HMRC’s MTD pilot
4. Register a trust online
5. Register an estate online for someone who has died 

- Reminder of digital records requirements (from VAT Notice 700/2).

• Top 5 Agent Questions about Digital Records
Again, to quote the newsletter:

“1) Can my customers still issue manual invoices?
Yes. If a business issues paper invoices it can type the selected data contained in the invoice into functional compatible software this includes spreadsheets. In addition the business can take a photo of the invoice and scan it into their software. 

2) Do my customers need to record every line on the invoice?
No. Where more than one supply is recorded on the invoice and these supplies are within the same VAT period and charged at the same rate of VAT you can record these as a single entry.

3) How do my customers record petty cash purchases?
Where you are claiming input tax on employee expenses and your employee provides the combined value of more than one purchase, you do not have to record each purchase separately. The business can record the total value and the total value input tax due. 

4) How do businesses record adjustments such as partial exemption calculations?
If the adjustment requires a calculation, this calculation does not have to be made in the functional compatible software Only the total for each type of adjustment needs to be kept in functional compatible software. Digital links are not required for any of the information used in the calculation however using software for all your calculations will reduce the risk of errors in your returns.
There is a separate process for correcting errors.

5) Do businesses need to record reverse charge transactions digitally?
If your software records reverse charge transactions then you do not need separate entries for the self-supply and purchase. 

If your software does not record reverse charge transactions then the business will need to record reverse charge transactions twice, once as a supply made and a second time as a supply received.”

- And another myth buster:

“HMRC will deny access to the online portal where a business has a turnover above £85K – even if this includes exempt supplies and their taxable turnover is below £85K.” 

This is incorrect.
Each business is responsible for checking their taxable turnover, and must sign up for the new MTD service if it is over the VAT registration threshold (currently £85,000). We will only close the legacy VAT service (aka the online portal) for a specific business once they have signed up to MTD – until they do, they can continue to use the existing service. The MTD rules only apply to businesses over the threshold. Those under the threshold can join voluntarily if they wish. VAT Notice 700/22 section 2 has more information about the turnover test.”


January 2019 


This article is published with the understanding that SWAT UK Limited is not engaged in rendering legal or professional services. The material contained in this article neither purports, nor is intended to be, advice on any particular matter. This article is an aid and cannot be expected to replace professional judgment. SWAT UK accepts no responsibility or liability to any person in respect of anything done or omitted to be done by any such person in reliance, whether sole or partial, upon the whole or any part of the contents of this article.