In light of HMRC’s Making Tax Digital (MTD) transformation, it is essential that we get familiar with new methods and regulations for submitting tax. One such change involves the introduction of mandatory MTD for VAT. In this article, we delve into one of the simplest ways to get MTD-compliant for VAT today: using VAT bridging software. Read on below to learn the essential ins and outs!

What is Making Tax Digital for VAT?

Making Tax Digital (MTD) is part of the government’s 10-year-long Tax Administration Strategy. The rollout and expansion of MTD represents a key component of this strategy, which is set to modernise and digitalise the UK’s tax system. The aim is to increase tax transparency and effectiveness, in part by reducing human error.

In the process, it is also hoped that the “tax gap” (the mismatch between HMRC’s expected tax revenue and actual revenue received from taxpayers) will be reduced. Furthermore, taxpayers can expect to benefit from a much more convenient taxation process, as well as an increase in public funds raised by HMRC.

What are the key changes?

For VAT-registered businesses, MTD for VAT is already underway. This means that you are no longer allowed to file paper-based VAT Returns (unless you have been granted a specific exemption). Instead, you are expected to maintain digital VAT records using appropriate software with minimal human intervention.

In addition to keeping digital records, VAT-registered businesses are also required to submit a VAT Return every quarter (every three months) using MTD-compatible software. When doing so, it is imperative that you make use of digital links where possible. The use of digital links refers to the avoidance of manual data manipulation which could lead to human error.

For example, if you are manually copying and pasting individual spreadsheet cells, or typing out individual datapoints which you have stored in a hand-written ledger, then you are not considered MTD-compliant. When submitting your VAT Return data to HMRC, it is vital to choose software which helps you to comply with this MTD “digital link” stipulation.

What is “bridging software”?

Although Excel is a widespread data manipulation and bookkeeping tool, it is in itself not MTD-compatible. However, with the use of bridging software, your spreadsheet data can be easily transformed into an MTD-compatible system. This is achieved through the use of digital links, drawing data directly from your Excel file.

How does bridging software work?

Bridging software is super simple. All you need to do is connect (digitally link) data from your spreadsheet into a special Excel page. In doing so, you remain 100% MTD-compliant, and further pieces of data are automatically generated without the need for manual calculation. Using AbraTax, the whole process takes four quick steps:

  1. Connect your VAT registration
  2. Download our Excel template
  3. Link 7 Excel cells using the template
  4. Re-upload the template to submit your VAT Return

Bridging software vs. bookkeeping software

Bridging software is the simplest way to connect your current Excel-based spreadsheets with HMRC’s MTD system. The only alternative is to use an MTD-compatible bookkeeping software package. Ultimately, that would mean moving all your business's record-keeping out of Excel into another programme – which could be both complicated and time-consuming as you get to grips with an unfamiliar system. This is why many businesses choose bridging software such as AbraTax instead.


VAT bridging software provides a simple yet wholly effective approach. Not only does it offer a more cost-effective solution than buying complex software packages – it also avoids the need to rehaul your whole bookkeeping process. In a few simple steps, you can transform your spreadsheet and be fully MTD-compliant – with minimal change to your existing system! Why not check out AbraTax now and file a free VAT Return with us 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).