Since the introduction of Making Tax Digital for VAT in April 2019, digital links have become an essential component of HMRC’s tax legislation. Although predominantly presented as a restriction on data management, they also provide a great opportunity for VAT-registered business owners to streamline their VAT Returns through MTD-compatible bridging software. Read on below to learn how how you could save time and money with bridging software for VAT today!

What are digital links?

The term “digital link” is used by HMRC to refer to a transfer/exchange of data made electronically between software. Digital links help users to reduce the human error arising from manual data manipulation. It is hoped by HMRC that such measures could reduce the so-called “tax gap” (the gap between expected tax revenue and the tax actually submitted).

When are digital links used?

Since the introduction of MTD for VAT, it is now mandatory for all VAT-registered businesses to maintain digital records. Once you have inserted financial data into your business's digital records, any further transfer or modification of that data must be completed using digital links, wherever possible.

Examples of digital links

Digital links can take numerous forms. Some examples of digital linking might be:

  • Connecting one Excel cell to another (using “=” to create a workbook link)
  • Emailing a spreadsheet with financial data to import into other software
  • Copying your data onto a flash drive for an accountant to use
  • Other computer-automated or API-enabled transfer of data

What is not a digital link?

Any manual transfer of data – such as jotting down invoice details in a ledger to copy later, or manually re-typing your financial details across different software – will not be considered MTD-compliant.

Copying and pasting individual datapoints is also unacceptable for Making Tax Digital, as this is still regarded a type of manual transfer. Although using a computer, simply copying and pasting is still open to the same types of human error as other MTD-incompatible methods.

Ultimately, your financial data must be recorded and maintained digitally. Once these datapoints have been entered, manual manipulation must be avoided.

What is MTD for VAT bridging software?

VAT bridging software is a core element of HMRC’s transition to digital tax. When it comes to submitting your quarterly VAT Returns, there are three main options:

  1. Purchase (or subscribe to) a bookkeeping software package
  2. Pay an agent (e.g. an accountant) to submit returns for you
  3. Use VAT bridging software to link your existing Excel records

Options 1 and 2 are often costly. In addition to extra fees and sharing your business’s most sensitive financial data with a third party, bookkeeping software requires you to transfer your records to an entirely new system. This can be very time-consuming and distract you from focussing on core business activities. Agents (such as accountants) will likely involve substantial costs, as well as the need to share your sensitive data.

Option 3, VAT bridging software, is a simpler, cheaper, and more privacy-focussed solution. By making use of digital links, MTD bridging software enables you to submit the essential details (only a few cells) from your Excel records straight to HMRC. This keeps you in control, with the rest of your financial data remaining private.

How does VAT bridging software work?

Excel spreadsheets are not inherently compatible with Making Tax Digital. However, bridging software allows you to "bridge" the gap between Excel and HMRC’s VAT Return system. The bridging itself involves digitally linking only 7 Excel cells (with an additional 2 cells automatically calculated). It’s quick, easy, and minimally invasive: there is no new software to install, and the majority of your data stays private on your device(s).

Essentially, you get to stay in total control while continuing to use Excel for your business’s record-keeping. In comparison to the other options, bridging software is also extremely low-cost. AbraTax (our MTD for VAT bridging software service) even offers you a free trial!


Since HMRC introduced Making Tax Digital in 2019, digital links have come to the fore. It’s hoped that digital linking will reduce the rate of manual error, as well as improving financial transparency for VAT-registered businesses. Luckily for VAT-registered business owners, digital links can also be leveraged for your benefit through bridging software for MTD. For VAT Returns, this means that services such as AbraTax can enable you to continue using Excel for your business finances while remaining totally MTD-compliant.

Why not sign up for your free trial today?

Disclaimer: We aim to offer educational articles on our blog, focusing on tax-related topics. However, it's important to note that over time, the relevancy of this content might diminish, and we cannot guarantee accuracy. While these articles serve as a tool for enhancing tax knowledge, they are not a replacement for expert advice in accounting, taxation, or legal matters, given the unique nature of each individual's situation. Should you require personalized assistance, we encourage contacting HM Revenue and Customs (HMRC).