Making Tax Digital (MTD) for VAT is part of a wider government initiative to simplify the tax system.
In April 2022, the MTD for VAT scheme was made mandatory for all remaining VAT-registered businesses who were not maintained in 2019, meaning they must all now use Making Tax Digital-compatible software to keep digital records and submit their VAT returns to HMRC.
As part of this, VAT registrations have also changed.
On 1 August 2022, the new VAT Registration Service (VRS) was rolled out, and this new process ensures every business is automatically signed up to Making Tax Digital when they register for VAT, removing the need for you to take that extra step.
If you’ve encountered issues when registering businesses for VAT as an agent or are unsure of the current requirements for Making Tax Digital for VAT, we’ve got all the latest information you need to ensure you and your clients stay up to date.
Here’s what we cover in this article:
Closure of the Making Tax Digital for VAT sign-up journey
You may have already registered a number of clients for Making Tax Digital for VAT through the online sign-up process, but from now on it won’t be available.
Lots of businesses have now signed up to MTD for VAT, and HMRC has signed up all remaining businesses automatically, unless they’re exempt or have applied for an exemption.
So you’ll no longer need to sign up your clients.
If you need to apply for an exemption from MTD for VAT for any clients for whom it’s not reasonable or practical to use a computer or the internet, you need to follow the exemption application process.
HMRC will consider each application on an individual basis and applications are being processed as quickly as possible.
Closure of the VAT portal
The HMRC online VAT portal was closed on 1 November 2022.
This was done to ensure all non-exempted VAT-registered businesses follow the new Making Tax Digital process and can no longer file their tax returns online via their online VAT portal which is effectively the ‘pre-MTD’ route.
These businesses should have already switched to Making Tax Digital compatible software in order to file their monthly or quarterly VAT returns.
However, the online VAT return portal does remain available for businesses who filed for their digital exclusion exemption before the portal closure date.
What is the new VAT Registration Service for agents?
One of the key changes made by the VAT Registration Service is to automatically register new businesses for MTD for VAT.
Letters from HMRC about your client’s application status, including their VAT Registration Number, will be issued to your address as well as the client’s principal place of business as provided in the application.
As an agent registering on behalf of clients under the VRS, you’ll need either an Agent Services Account (ASA) ID and password, or your HMRC Online Services account ID and password.
HMRC has advised the quickest and most straightforward way to register a client for VAT is to use an Agent Services Account and to follow these steps to register for VAT online.
You’ll need to provide your name, phone number and email address. If you decide to use your old HMRC Online Services account details, you’ll be asked for additional information to verify your identity.
So far on this journey, some accountants have encountered challenges with the new VAT Registration Service.
The main issues are concerning delays, with a number of accountants waiting between two and three months for an application to be processed.
Many people have complained about receiving unhelpful status update letters and not being able to contact the helpline.
To give you an indication of process times, on 25 October 2022, the ICAEW Tax Faculty reported VAT registration applications were generally taking around 40 working days to process.
If you need to follow up an application you can contact HMRC after 40 working days have elapsed by sending an email or by calling 0300 322 7870.
HMRC has already made some updates to the service based on the feedback it has received so far and there are more improvements in the pipeline.
For example, if you’re waiting for information from your client, you can now save an application form in draft for 28 days; this was increased from seven days.
A task list view has also been introduced to allow an agent to edit the answer of a particular question without clicking through the entire form.
And a digital upload feature has been added to enable supporting documents to be attached to the registration.
Final thoughts on where we are with Making Tax Digital for VAT
All VAT-registered businesses have now been signed up to MTD for VAT either through the old sign-up process or automatically via VRS, which means every business should now be using MTD-compatible software to keep digital records and submit VAT returns.
The recent closure of the online VAT portal was the final step in moving all non-exempted businesses over to the new digital VAT return process.
HMRC is now working through all remaining teething problems created by the new VAT Registration Service to ensure fast and efficient VAT registration going forward.