Making Tax Digital for VAT – 4 easy steps to get your accounting practice ready

01 Mar 2019  |  
Tags: Outsourcing
Making tax Digital in 4 easy steps

Despite the 1 April 2019 deadline for Making Tax Digital creeping up, almost 53% of accountants’ clients are struggling to prepare for Making Tax Digital. Research from the Association of Accounting Technicians (AAT) found that 63% of the surveyed accountants said their clients affected by Making Tax Digital for VAT will not be fully ready before the start of April!

The QXAS team of accountants have listed 5 easy steps to help you get your practice and clients up to speed, and importantly avoid the fines come April 2019 when the VAT element of the new system comes into effect.

  1. Set up an Agent Services Account

An Agent Services Account is required to be able to act on behalf of your clients with regards to MTD and will be used for all new HMRC services going forward. The steps are simple, but there are quite a few elements so it is worth getting this done early.

According to Accountancy Age, you should be careful when setting up the ASA as you might have already set up your account in order to access the Trust Registration Service. If you are a larger accountancy practice, the ASA should be set up centrally.

Before you start registering any clients for MTD, ensure:

  • you have MTD compliant software for this client
  • their latest VAT return under the Government Gateway has been submitted
  • The client’s data is up to date, complete and accurate, and
  • If your client pays HMRC via Direct Debit, you should sign up at least two weeks before their next VAT return is due

We’ve put together a detailed guide to help accountants set up an Agent Services Account – you can download it here: Get an HMRC agent services account. For further guidance, please refer to the following HMRC guide or video.

  1. Figure out which clients will be impacted by MTD for VAT

An important part of MTD preparations is understanding which clients within your customer base you’ll need to migrate to digital record-keeping and when.

As mentioned earlier in the blog, it is mandatory for those with revenues above the VAT threshold of £85,000 to start keeping digital records.

For more information on segmentation, download and complete our free MTD client segmentation template. It will help you learn which clients are impacted, how many are compliant and which clients require a MTD compliant solution.

Making Tax Digital Client segmentation template for accountants

  1. Communicate the changes to your clients

Communication to clients is key to get your clients up to speed on the implications of Making Tax Digital. ACCA’s head of advisory Glenn Collins has issued a stark warning for practitioners who have not communicated the changes to clients, “You could damage client relationships if your messaging doesn’t occur soon. Informing clients is vital at this stage as there’s a lot of noise out there, and there are other firms that will take advantage of you if you haven’t taken any action.

Get your clients ready for MTD with our communications toolkit. The toolkit will provide ready-to-use client emails and letters so you can make sure they are ready well ahead of the deadline. The toolkit includes information on:

  • Communicating MTD to clients
  • Example letters to clients by category
  • Checklist: Preparing for Digital Tax


  1. Find an HMRC approved, ‘functional compatible software’ for MTD for VAT

How your practice approaches the selection of MTD compatible software depends on the current level of your client’s technology maturity and business model.  There are three ways to become compliant:

1)      Bridging software or API enabled spreadsheets

 If your clients make very little use of technology and only need it for the purpose of filing a VAT return, you may consider using a spreadsheet bridging software – an application which extracts content from a spreadsheet and uploads it to HMRC via their Application Programming Interface (API) platform.

 While this is a welcome solution, it’s better to speak to your clients and explain how greater efficiency and productivity can be gained by using cloud accounting software. MTD is a strategic opportunity and simply using Excel will not resolve the issues that you have around re-inputting, work duplication and manual errors.

 2)      Cloud accounting software

When it comes to clients who are technologically mature, they might already be using cloud accounting software packages where data is saved on an external server and can be accessed in real time via devices such as computers, mobile phones or tablets. However, you need to ensure the software is HMRC approved and MTD compliant.

 HMRC provides a list of software suppliers who are developing MTD-compatible software. Please note, this doesn’t mean all the software from the listed suppliers will be MTD-compatible and you should inquire with the supplier directly. 

3)     QXAS’ Free MTD software for accountants

If your practice doesn’t own functional compatible software, then QXAS can provide you free* MTD compliant software for quarterly VAT filing and digital record keeping as long as you outsource your client’s bookkeeping to us.

 We have partnered with two software suppliers on the HMRC approved list, and are proving free software as long as you outsource your bookkeeping to us. Our service also includes assistance on client segmentation, setting up an Agent Services Account and communicating the changes to your clients using your inbox.

* Terms & Conditions apply. For more details book your Free Making Tax Digital 1-2-1 consultation.

We are ready for Making Tax Digital, are you?

As we write this, there are only 31 days before Making Tax Digital for VAT begins. According to AccountingWeb, MTD poses a number of significant challenges and will create an increase in workload, particularly for smaller practices. On top of that, accountants will need to support their clients in migrating their books online and assist with accurate quarterly reporting. This effectively means tax planning at full steam four times a year!

Considering the huge effort that is required along with handling the peak demands occurring for compliance services as March end approaches, now is the time to consider how you will focus your people resources to get ready for MTD.

It might be worth considering outsourcing your bookkeeping to external professionals. Outsourcing partners enable you to provide services to your clients without having to recruit a whole new workforce.

Throughout March we are offering accountants and bookkeepers a free no-obligation consultation to help you prepare for MTD. Your free-MTD consultation will cover the following:

  • Identifying the areas of the MTD process that do not meet the HMRC requirements
  • Software options available to you to make the process compliant, including free MTD software*
  • Advice on segmenting your clients, and setting up an Agent Services Account
  • How we to deal with the workload while improving bookkeeping profits by up to 50%

After the consultation, we'll email you a customised action plan with next steps for your accountancy practice. Click here to get your free consultation.