Agents Becoming MTD for VAT Compliant with HMRC - Step by Step guide.

HMRC wants to transform the tax administration to be more effective, more efficient, and make it easier for taxpayers to get their tax right. Making Tax Digital (MTD) for VAT became mandatory for businesses on 1st April 2019. This means that businesses who have an annual turnover of over £85,000 are required to submit their VAT Returns to HMRC via  MTD online services.

As businesses will no longer be able to use third party software to file non-MTD VAT Returns from April 8 2021, to avoid disruption to your filing process, we recommend that you migrate your or your client's VAT business(es) across to MTD for VAT before this time. Filing VAT returns after HMRC remove the XML filing service provides further information on this change.

Before you can submit VAT Returns under the MTD service, you need an Agent Services Account. This will allow you to access new and future HMRC online services and will allow TaxCalc to retrieve and submit VAT Return data to HMRC.

Step 1: Register for an Agent Services Account

When registering for an Agent Services Account (ASA) with HMRC, you will need:

1. An existing government gateway ID and password
   • Please note, you may have a single government gateway account with access to all services or multiple log ins for different services. You need to ensure that you use the one that is associated with the VAT service.
2. UTR and postcode associated with the UTR

You need to go to this HMRC website and follow the process accordingly. 

We are unable to assist you with this part of the process and your queries will need to be directed to HMRC via their online support channel. You will see text for ‘Get help’ or ‘Is there anything wrong with this page’ link on the page in the online service you’re using.

Once the registration has complete for an ASA, you will be issued with separate login credentials (the login ID will consist of 12 digits). These will not replace your previous government gateway credentials and you should ensure that you make a note of these for later use. You will also be issued with an agent reference number in the format of 'ABCD-123-4567'. This reference should be noted as it is used as a backup, should you lose your login credentials.

Step 2: Link your VAT clients to your Agent Services Account

Now that you have your new ASA registered with HMRC, you have to link your government gateway account. By doing this, you will transfer the existing authorisation that is in place from your government gateway account. To do this, please see the below instructions:

1. Click here to load the ASA log in page
2. Insert your new ASA credentials (those issued at Step 1 above)
3. You should be presented with the below screen. Click on the link for Link your current Self Assessment and VAT clients to this account.
   
4. You will be given a new log in window where you have to click on Sign in with another account where you will then need to insert your government gateway login details previously used to access your VAT clients. 
5. You then need to follow the windows through as provided for by HMRC.

Please Note: If you have multiple government gateway IDs and passwords for VAT services, you may need to do this for each set of credentials. There should be no need to re-authorise clients where you are already authorised to act on their behalf for online services.

If you want to act for a new client that you have not copied across in this step, you can 'Ask a client to authorise you' from your Agent Service Account. A link will be sent to your client who can the follow the steps to authorise you.

We are unable to assist you with this part of the process and your queries will need to be directed to HMRC via their online support channel. You will see text for ‘Get help’ or ‘Is there anything wrong with this page’ link on the page in the online service you’re using.

Step 3: Enrol your clients' business for MTD VAT

In order to do anything with your clients via your ASA, each business needs enrolling for MTD VAT. Unfortunately there is no automation in place and each individual business needs to go through the enrolment process. Therefore the decision needs to be made whether your client's will enrol their business themselves or whether you will do this on their behalf.

After enrolling the client for MTD VAT, you will receive an email directly from HMRC (within 72 hours) to confirm the activation has taken place which will then allow you to submit your clients’ returns digitally. For more information on how to enrol a business, please see the link to the HMRC website. 

We are unable to assist you with this part of the process and your queries will need to be directed to HMRC via their online support channel. You will see text for ‘Get help’ or ‘Is there anything wrong with this page’ link on the page in the online service you’re using.

Step 4: Authorise Your Software

Now that all of the setup with HMRC is in place, the below remaining steps are to get TaxCalc ready to start processing the MTD VAT submissions. 

1. Open your client in Practice Manager
2. Go to the Business section on the left hand menu
3. Ensure that the client is marked as Enrolled for MTD VAT (tickbox within the VAT information section of the Business record)
4. Open the client in VAT Filer 
5. At this point, you can either create a period manually or you can fetch data for the period expected by HMRC. If you create the period manually, the period dates expected by HMRC will be validated.
6. For TaxCalc to be able to communicate (receive and transmit data electronically), you as the agent have to authorise your application to do this. You will be prompted to authorise TaxCalc once you click on Fetch VAT Periods (as shown below). 
   
7. Be sure to enter your new ASA details here (created in Step 1). 
8. This token is valid for 18 months. Further information about tokens can be found in our Knowledge Base article for How to use HMRC VAT APIs. 

Step 5: Using TaxCalc - final setup

Before any VAT returns are processed, you should ensure that your new ASA credentials are saved in TaxCalc. You will need to go to Admin Centre> Applications> Double click VAT Filer > Filing Credentials > Insert the applicable details for your new account. Skip past the Token Management screen as this has already been complete by Step 4 and Finish and Save the details. 

From here, you can now start the process required to file the MTD VAT returns. If you would like further information on how to use TaxCalc for the processing of the VAT returns, please see the link to our video here.

Common errors when using TaxCalc for MTD VAT returns can be seen below:

Common MTD VAT errors

1046 Authentication error for VAT Filer

Please note that this information was correct at the time of writing and is subject to change.