Under Making Tax Digital for VAT, every VAT registered business must keep digital records and file VAT Returns through compatible software unless it is exempt. Agents act for clients through an HMRC agent services account, gain access through the digital handshake, and can apply for exemptions on a client’s behalf, but the grounds for exemption are narrow and are judged on the client’s own circumstances.

What rules sit behind MTD for VAT?

The Value Added Tax (Amendment) Regulations 2018 (SI 2018/261) inserted the digital record keeping requirement into regulation 32A of the VAT Regulations 1995 and required a person subject to it to make returns using a compatible software return system (regulation 25A(2A)). They took effect from 1 April 2019 for the first VAT period starting on or after that date. The Value Added Tax (Amendment) Regulations 2021 (SI 2021/986) removed the exemption for businesses with turnover below the registration threshold, with effect from the first VAT period starting on or after 1 April 2022. HMRC’s VAT Notice 700/22 explains the rules, and the boxed passages in it have the force of law. For the business side of the rules, see our overview of Making Tax Digital for VAT.

How does an agent get access to VAT clients?

HMRC’s agent step by step guide says all VAT registered businesses should now be signed up and that agents no longer need to sign clients up. What agents need is:

  • An agent services account. This is separate from the older HMRC online services for agents account. Where a client is authorised only in the older account, HMRC says the client must be copied across to the agent services account.
  • Client authorisation. Notice 700/22 section 4 says agents with an existing authorisation to act for VAT do not need to be reauthorised for MTD. New clients are authorised through the digital handshake: the agent selects “Ask a client to authorise you” and sends the client the link, which expires after 21 days. HMRC’s authorisation table lists VAT as digital handshake only, with no paper route; form 64-8 applies only to the legacy VAT service.
  • Software access. Notice 700/22 says agents must have software of their own or access to the software holding the client’s records. HMRC’s software guidance says the authority granted to software lasts 18 months.

Once authorised, the agent can use HMRC’s service for managing a client’s VAT details to change details, print certificates and returns, or cancel a registration. HMRC says changes to a client’s business details must be reported within 30 days. Our page on the HMRC agent services account covers setting up the account.

How do firms run VAT work for many clients?

The practical problem is not filing but controlling data from many systems. Notice 700/22 accepts that a client can have more than one agent for different MTD services with different permission levels. It also recognises that agents may not have the client’s source data, and where they cannot correct the digital records themselves they must tell the client what to correct.

Section 2.3 of the notice says a third party helping a business needs either full access to the digital records, or for the business to keep digital records and send the data electronically, for example by email or on a pen drive. That shapes how a firm takes in data: a shared cloud ledger, or exported files that preserve the digital links described in our page on digital links.

Several easements help with bulk work. Where a letting or similar agent makes supplies for the client, a summary document from that agent can be recorded as a single invoice. Petty cash purchases under £50 including VAT can be recorded as totals, up to £500 per entry. Year end and partial exemption adjustments only need their totals recorded in the software, not the calculation.

Deadlines are unchanged by MTD: HMRC says the online return and payment are usually due one calendar month and 7 days after the end of the period. Late returns build penalty points, with a £200 penalty once the threshold for the client’s filing frequency is reached; see VAT penalty points. Because each client’s periods are fixed by HMRC, a firm with many quarterly clients should map every client’s period end dates in its workflow system rather than rely on a single calendar.

Which businesses are exempt?

Regulation 32B and section 2.1 of Notice 700/22 set out the exemptions. A business does not need to follow the rules if HMRC is satisfied that:

  • it is not practical to use digital tools to keep records or file returns, for reasons such as age, disability or location;
  • the business is subject to an insolvency procedure;
  • the business is run entirely by practising members of a religious society or order whose beliefs are incompatible with electronic communications or electronic records; or
  • it is already exempt from filing VAT returns online.

HMRC’s guidance adds that a business that has cancelled its VAT registration but still has to send its final return is exempt without applying. Notice 700/22 is clear about what does not qualify: age alone, unfamiliarity with software, or a religious objection from someone who already files online and uses devices for other purposes. Extra effort, time or cost in moving to MTD is not on its own a ground, although HMRC takes it into account in its overall assessment.

How does an agent apply for an exemption for a client?

The claim goes to HMRC’s VAT general enquiries line, by phone or in writing. HMRC needs the VAT registration number, business name and principal place of business, the reason for the request, how returns are filed now, and why the client cannot keep digital records or file through software. Notice 700/22 says an agent can apply but must fully understand the client’s circumstances and have authority to act. HMRC also says it is usually better for the client to call personally, because the client knows best how they use technology.

HMRC gives its decision in writing, either confirming the exemption and the client’s obligations or explaining why it is refused and that the client can appeal. While a request or appeal is pending, the client keeps filing as they do now. An exempt business can file by post or through its VAT online account, and HMRC can charge a penalty of up to £400 for a paper return from a business that is not exempt. Where a business in an insolvency procedure has a company or individual voluntary arrangement, it can choose paper or the online account; otherwise it must send a paper return.

One point catches agents out. Notice 700/22 says that if a third party stops supporting a business and the business cannot follow the rules without them, the business should ask HMRC for an exemption. A firm disengaging from an elderly or remote client should therefore flag that option in its disengagement letter.

How do adjustments and error corrections work in the software?

Section 3.4 of Notice 700/22 says adjustments to input or output tax must be recorded in the software, but only as totals for each type of adjustment. The digital record of the underlying supply does not need to be changed. Where an error is corrected using error correction method 2, the digital records of the supplies need not be amended either, although all normal records must be kept. The notice gives the example of a £65,000 error that must go through method 2. Our page on correcting VAT errors explains the methods themselves.

How might this look across a client list?

Illustration only. A firm acts for 40 VAT clients. Thirty keep records in cloud software the firm can access. Six send spreadsheets, which the firm submits through bridging software after checking the formulas still link to the source sheets. Three clients came across from another firm and were authorised only in the old online services account, so the firm copies them into its agent services account before the next return. The last client, an 84 year old sole trader with no internet at home, has relied on a family member who is moving away. The firm explains that age alone is not enough, gathers evidence about access and ability, and helps the client phone HMRC to ask for an exemption.

What mistakes do agents make?

  • Trying to authorise a new VAT client on form 64-8 instead of the digital handshake.
  • Letting the 21 day handshake link expire without chasing.
  • Applying for an exemption on the basis of age or lack of confidence alone.
  • Copying and pasting figures into a submission spreadsheet, breaking the digital links.
  • Sending a paper return for a client who has not been granted an exemption.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.