Making Tax Digital for VAT marks a key step in the UK government’s broader digitalisation agenda. Initially rolled out on 1 April 2019, this regulation made it mandatory for VAT-registered businesses above the threshold to maintain digital records and use compatible software to file their VAT returns. The shift aims to reduce errors, enhance efficiency, and modernise the tax system.
Many businesses, particularly those still relying on spreadsheets or older accounting systems, found the adjustment challenging. Instead of overhauling their entire accounting approach, these businesses often opt for bridging software, which allows them to meet the legal requirements of digital VAT submission while continuing to use their existing tools.
What Is VAT Bridging Software?
VAT bridging software serves as a digital intermediary that connects a business’s current spreadsheet-based or non-compliant accounting system with HMRC’s Making Tax Digital system. By using this software, businesses can upload their VAT return data in a compliant digital format without switching to new accounting software.
The solution is especially valuable for those who have been using spreadsheets to calculate VAT returns. It allows them to digitally submit the VAT 100 report data to HMRC with minimal disruption.
Why Is Bridging Software Necessary?
When MTD rules came into force, businesses were required to submit VAT returns through software capable of interfacing with HMRC’s system via its APIs. However, spreadsheets and some traditional bookkeeping software lack this functionality. Rather than force all businesses to immediately adopt full accounting platforms, HMRC permitted the use of bridging tools that can act as digital gateways.
This provision allows businesses to remain compliant with MTD while keeping their existing workflows, especially useful for those managing complex VAT data manually or across multiple teams.
When to Use Bridging Software
Any VAT-registered business with taxable turnover above the VAT registration threshold must comply with MTD rules. Businesses using software that does not meet MTD compatibility requirements, or that rely on spreadsheets for VAT calculations, will need bridging software to meet the submission standards.
Bridging software is also beneficial for accountants who manage multiple clients using different systems. It enables them to import data from various formats and submit VAT returns through a unified platform.
How VAT Bridging Software Works
The first step in using bridging software is registering for MTD for VAT through HMRC. After registering and receiving confirmation, the next task is authorising your bridging software to interact with HMRC.
Most bridging software tools come with guided instructions to connect your system with the HMRC account. This usually involves signing in to your HMRC account through the software’s interface and providing the necessary permissions.
Once authorisation is complete, the software allows you to upload your VAT return figures—typically prepared in a spreadsheet format. After uploading, you should verify the data fields to ensure accuracy before submission. The bridging software then transmits this information to HMRC using its APIs.
File Preparation and Submission Steps
- Prepare your VAT data in a spreadsheet using your usual format.
- Open your bridging software and import the VAT return data.
- Review and verify that the nine VAT return fields align with your spreadsheet.
- Submit the return through the software interface.
These steps provide a clear, repeatable process for each VAT submission period, minimising room for error.
Common Features of Bridging Tools
Most VAT bridging software solutions share core functionalities, including:
- The ability to import spreadsheet or CSV files
- Automatic mapping of data to HMRC’s VAT return form
- A user dashboard displaying submission status and payment history
- Secure login and submission protocols
Some tools also offer additional features such as partial exemption calculations, support for group VAT registrations, and integration with email notifications.
Affordability and Accessibility
A primary advantage of bridging software is affordability. Full-featured accounting software can be costly, with subscriptions adding up annually. Bridging software typically comes with a lower price tag, whether it’s a one-time license or an annual fee, making it particularly appealing to small and medium-sized enterprises.
This low-cost model enables businesses to stay compliant with MTD regulations without undergoing a full technological overhaul. It also offers an interim solution while evaluating more permanent changes in digital infrastructure.
Ease of Integration
Another strength of bridging software is its ease of integration. Most solutions are built to work with standard spreadsheet formats such as Excel. This means users do not need to adapt their existing data collection methods. Data can be exported from existing systems and directly uploaded without requiring reformatting.
For companies operating across multiple departments, this flexibility is especially important. Teams can collaborate using familiar tools and consolidate data into a central spreadsheet for easy submission.
Accuracy and Reduced Risk
Using bridging software also helps reduce the risk of errors. By automating the submission process and allowing data verification before filing, businesses can ensure that the figures submitted to HMRC are accurate. Many tools provide a preview of the final VAT return before transmission, helping users identify discrepancies and correct them in advance.
This digital audit trail is also valuable for compliance purposes. HMRC can request VAT return histories during inspections, and bridging software enables businesses to retrieve and present this data quickly.
Who Benefits the Most?
While any business using non-MTD-compliant software stands to benefit, some specific groups may find bridging software especially useful:
- Small businesses using spreadsheets
- Enterprises with bespoke or outdated accounting systems
- Accountants managing VAT for multiple clients
- Businesses transitioning to new digital platforms
Each of these users can maintain operational continuity without immediate investment in expensive software or comprehensive training.
Implementation Challenges
Despite the many advantages, implementing bridging software is not without its challenges. Businesses must ensure that their spreadsheet data is structured correctly. Inconsistent formatting or missing values can cause submission errors.
Training staff on how to use the software and verifying that the authorisation process is completed correctly is also essential. While most tools aim to be user-friendly, familiarity with HMRC’s VAT requirements is still necessary.
Another consideration is ensuring timely updates. As HMRC occasionally updates its digital interface and submission standards, businesses must ensure that their software provider keeps pace with these changes to avoid issues during filing.
Importance of HMRC-Recognised Tools
It’s critical to choose bridging software that is officially recognised by HMRC. Such tools meet all the required technical standards and ensure compliance with submission protocols. HMRC provides a list of approved software providers, which can serve as a reliable reference during selection.
Using approved tools not only guarantees technical compatibility but also minimises the risk of rejection or errors during submission. This recognition also suggests that the tool has undergone adequate testing and is equipped to handle different business use cases.
Data Security and Privacy
Given that financial data is sensitive, security is a significant factor when choosing bridging software. Reputable providers implement encryption and secure access protocols to protect information during data import, storage, and submission.
Additionally, maintaining compliance with data protection regulations, such as GDPR, is essential. Businesses should check the provider’s privacy policies and ensure that data is not shared or stored without consent.
Strategic Advantages of Bridging Software
Minimising Disruption During Transition
One of the primary benefits of bridging software is the ability to maintain current operations while becoming compliant with MTD rules. Rather than learning a new system from scratch, businesses can continue their current bookkeeping practices and use bridging tools solely for submission.
This flexibility minimises training requirements and operational disruption. Employees already familiar with existing spreadsheets or legacy tools can continue working as usual, requiring only minor instruction on using the bridging interface.
Saving Time on Implementation
Switching to a new MTD-compliant accounting platform can take weeks of preparation, data migration, and testing. By contrast, setting up bridging software typically takes less than a day. Most providers offer easy setup instructions and even one-on-one support during the initial configuration.
This rapid implementation process is especially useful for businesses under tight compliance deadlines or with limited technical support.
Supporting Hybrid Systems
Some businesses rely on a mix of accounting methods—perhaps using spreadsheets for internal tracking and other software for payroll or invoicing. Bridging software allows them to maintain this hybrid model. There’s no need to unify all functions under a single platform immediately.
This versatility is useful for growing businesses that need time to budget and plan for a more integrated system in the future.
Tracking and Reporting
Many bridging tools offer built-in tracking dashboards that show pending, submitted, and paid VAT returns. This enhances transparency and helps users manage submission schedules. Businesses can set internal reminders and monitor submission status from a central dashboard.
Historical VAT returns are also usually archived within the tool, making it easy to retrieve past records for accounting or compliance checks.
Cost Control
In a time when cost efficiency is crucial, bridging tools offer a way to meet legal obligations without incurring unnecessary expenses. The lower cost of bridging software compared to full accounting systems means businesses can remain compliant without blowing their budget.
Furthermore, many tools provide pay-as-you-go options, which is ideal for businesses with seasonal activity or irregular VAT periods.
Avoiding Common Pitfalls
While bridging tools are generally easy to use, businesses must remain cautious about common errors. These include incorrect formatting in spreadsheets, failing to authorise software access with HMRC, and submitting duplicate returns.
Proper training, user guides, and error alerts within the software help mitigate these issues. It is also advisable to assign responsibility for VAT returns to a designated employee or team to ensure consistency and accountability.
Scalability and Long-Term Planning
While bridging software serves immediate needs, businesses should periodically assess whether it continues to meet their long-term goals. As operations grow, the need for real-time reporting, advanced analytics, and integrated functions may prompt a move to more robust platforms.
Nonetheless, bridging software can scale reasonably well for many users. Some tools support multiple client accounts, group VAT registrations, and partial exemptions—all features required by larger or more complex businesses.
User Support and Documentation
Reliable bridging tools come with comprehensive support, including email, chat, or telephone assistance. Most providers offer detailed documentation such as user manuals, video tutorials, and troubleshooting tips.
During VAT deadlines, quick access to support can make a significant difference. Businesses should factor support quality into their decision-making when selecting a provider.
Understanding Business Requirements
Before choosing a bridging software solution, businesses must identify their specific requirements. Factors such as the scale of operations, frequency of VAT submissions, number of users, and the type of VAT accounting scheme used all influence the choice of software.
It’s important to assess the business’s current record-keeping practices. If the business uses spreadsheets exclusively, software that offers seamless spreadsheet import functionality is crucial. For those using multiple systems or needing to manage client data across departments, software with multi-user access and client management tools may be more suitable.
Key Features to Look For
When evaluating bridging software options, certain features can enhance usability and efficiency. Key elements to consider include:
- Compatibility with Excel, CSV, or other spreadsheet formats
- Simple HMRC authorisation process
- Clear and intuitive user interface
- Accurate mapping to VAT return fields
- Real-time error checking and validation
- Record of historical submissions
- Secure data encryption and GDPR compliance
Software with these capabilities can streamline VAT return preparation and submission, helping to reduce manual effort and improve data integrity.
HMRC Recognition and Updates
Businesses should always select software that is recognised by HMRC. Official recognition ensures that the software has been tested for compliance with the latest technical standards. It also provides assurance that the software will be updated to reflect changes in HMRC’s digital systems.
With HMRC’s API specifications periodically evolving, it is essential that software providers keep their platforms up to date. Regular updates help prevent submission errors and compatibility issues during peak filing times.
Evaluating Support and Documentation
Reliable customer support is vital, especially during VAT submission periods when errors or confusion can delay compliance. Choose software providers that offer comprehensive support channels, such as live chat, telephone assistance, and detailed help guides.
Additionally, robust documentation, including user manuals, video tutorials, and FAQs, can help users navigate the software independently. Businesses with limited technical expertise may benefit from providers that offer onboarding sessions or one-on-one support during initial setup.
Budget Considerations
While bridging software is generally more affordable than full-scale accounting platforms, pricing structures vary. Some software providers charge per submission, others offer monthly or annual subscriptions, and some provide a one-time license. Businesses should evaluate their submission frequency and volume to determine the most cost-effective model.
A business that files quarterly VAT returns may not require the same plan as one submitting multiple returns monthly for different departments or clients. It’s also important to consider the scalability of the chosen pricing model. As a company grows or its VAT obligations become more complex—such as handling multiple VAT registrations, partial exemptions, or group submissions—the pricing structure may need to accommodate additional features or users.
Some bridging tools charge extra for multi-user access, advanced reporting, or additional client management capabilities, which can increase costs over time. Therefore, businesses should look beyond the initial price and evaluate the total cost of ownership, especially if long-term use is anticipated. Comparing trial periods or demo versions can also help ensure the pricing matches the feature set and support level needed.
Testing the Software
Before full implementation, it’s advisable to test the software using dummy data or a trial version if available. Most providers offer demos or test environments to simulate the VAT submission process.
During testing, businesses should:
- Import sample VAT data from their spreadsheet
- Review auto-populated fields in the digital VAT return
- Validate totals and detect any rounding or mapping issues
- Walk through the HMRC authorisation and submission flow
This process ensures that the team is comfortable with the interface and that the software handles the business’s specific VAT data accurately.
Planning Internal Rollout
Once software is selected and tested, businesses should prepare for rollout. Assigning responsibility for VAT submission to a specific employee or team helps maintain accountability. Establishing internal procedures for preparing spreadsheets, verifying data, and uploading reports is essential.
It’s also helpful to create a checklist for each VAT period that includes:
- Date of return deadline
- Final spreadsheet verification
- Software import and mapping check
- Submission confirmation from HMRC
This checklist standardises the process and reduces the likelihood of missing steps or encountering delays.
Training and Familiarisation
Even user-friendly software may require some basic training. Conducting a brief training session for relevant staff can help smooth the transition. Training should focus on:
- Accessing the software and logging in
- Authorising the tool with HMRC
- Uploading VAT data and reviewing fields
- Recognising validation warnings
- Submitting and receiving confirmation
Encouraging staff to practice submissions before the official deadline can build confidence and reduce errors.
Ensuring Data Security
Data protection is critical when transmitting VAT return information. Businesses must ensure that the selected software uses secure data encryption, follows GDPR principles, and does not share data with third parties without consent.
Review the provider’s privacy policy and terms of service to understand how data is stored and handled. Software with two-factor authentication and secure login protocols adds an extra layer of protection.
Ongoing Software Maintenance
Once implemented, the software should be regularly updated and reviewed. Subscribe to provider newsletters or notification services to stay informed of new features or compliance changes. Some software solutions offer automatic updates, which ensure users always operate with the latest version.
Regular checks on software functionality and periodic staff refresher training can help maintain high compliance standards. It’s also a good idea to maintain a log of issues or suggestions to discuss with the provider’s support team.
Dealing with Submission Errors
Despite best efforts, errors can occur during the VAT submission process. Bridging software that provides detailed error messages, submission status updates, and rollback options can help resolve issues quickly.
In the event of a submission failure, businesses should:
- Review the error message and suggested fix
- Check spreadsheet formatting and values
- Confirm that the software is authorised and updated
- Re-submit after corrections
Support teams from reputable providers can assist with complex problems or unexpected failures.
Scaling Up as the Business Grows
As a business grows, its tax reporting requirements may become more complex. This includes managing additional VAT registrations, handling group VAT returns, or introducing international transactions. Many bridging tools support these advanced features.
However, there may come a point when transitioning to fully integrated accounting software becomes more efficient. Bridging software serves as a scalable short-to-medium term solution. Its flexibility means businesses can scale submissions without drastically altering their current systems.
Considering Alternative Use Cases
While bridging software is commonly used for spreadsheet submissions, it can also serve:
- Accounting professionals managing returns for multiple clients
- Companies needing to file retrospective VAT adjustments
- Businesses undergoing audits or needing access to detailed submission records
These alternative applications make bridging tools valuable even beyond the basic quarterly VAT submission process.
Planning for the Future
Making Tax Digital is expected to expand to cover other taxes, such as Income Tax Self Assessment and Corporation Tax. Businesses using bridging software for VAT should stay informed about upcoming changes and consider whether similar tools will be available for other obligations.
Planning ahead includes:
- Monitoring government announcements
- Discussing new product offerings with software providers
- Evaluating whether a more integrated solution is appropriate
Staying proactive ensures that the business will not face compliance challenges as new MTD phases roll out.
Maintaining Compliance Long-Term
For ongoing success, it’s essential to treat VAT submission as part of a wider compliance strategy. Keep a calendar of VAT deadlines, update staff on procedural changes, and review software performance periodically.
Using bridging software consistently and correctly will not only keep the business aligned with HMRC regulations but also create reliable financial records that support wider financial planning and forecasting.
Keeping a structured archive of submission receipts, spreadsheets, and correspondence can prove invaluable in case of HMRC queries or inspections.
Preparing for Expanding MTD Requirements
Although Making Tax Digital for VAT was the initial phase, HMRC has plans to expand the digital compliance framework to include other taxes. The next major step is Making Tax Digital for Income Tax Self Assessment, which will affect sole traders and landlords. MTD for Corporation Tax is also expected in the future.
Businesses already using bridging software for VAT returns should stay informed about these upcoming phases. While current bridging tools may not support other tax types yet, vendors may expand their offerings or introduce new modules as regulatory needs evolve.
Bridging Software as a Transitional Tool
For many businesses, bridging software is not just a solution—it’s a transitional tool. It buys time while organisations plan for broader digital transformation. Over time, businesses may find it beneficial to switch to fully integrated cloud accounting systems that automate not just VAT filing but also invoicing, payroll, forecasting, and real-time tax calculations.
However, until such a transition is feasible, bridging software remains a viable and compliant option. Businesses should map out a roadmap that includes review points to assess whether the software still meets their needs as digital requirements expand.
Integrating Bridging Software with Broader Accounting Processes
To maximise the value of bridging tools, businesses can integrate them more deeply into their existing accounting workflows. For example:
- Linking spreadsheets directly with financial tracking sheets
- Using macros or formulas to auto-calculate VAT fields
- Creating templates that align with the bridging software’s import format
- Scheduling regular internal VAT reviews before each filing deadline
This integration reduces manual handling and improves consistency across reporting periods.
Monitoring HMRC and Industry Updates
The MTD landscape continues to evolve, driven by government policy, software innovation, and user feedback. Staying updated is critical for maintaining compliance and seizing new opportunities to improve reporting efficiency.
Businesses should subscribe to HMRC newsletters or updates and follow news from their software provider. Participating in webinars or industry events can also help accounting teams stay ahead of changes and best practices.
Evaluating Software Providers Over Time
While the software a business chooses initially may suit its needs, long-term performance should not be taken for granted. Periodic evaluations can help determine whether the provider continues to deliver value. Consider:
- Is the software regularly updated?
- Are there new features that enhance functionality?
- Has support response time improved or declined?
- Is pricing still competitive with market alternatives?
Conducting these reviews annually ensures businesses remain agile and responsive to both internal and external shifts.
Supporting Multi-Entity or Group VAT Returns
As businesses grow, their tax requirements may become more complex. Some bridging tools support features such as group VAT registrations or subsidiary management. These features allow for consolidated reporting and simplified compliance across multiple business units.
Even smaller businesses that plan to scale should consider whether the software they choose can accommodate future organisational growth without requiring immediate replacement.
Creating an Internal VAT Knowledge Base
One of the challenges of compliance is continuity, especially when staff members leave or change roles. Businesses can future-proof their processes by documenting VAT submission workflows internally. This documentation might include:
- A step-by-step guide to using the bridging software
- Spreadsheet templates for data collection
- Checklists for pre-submission verification
- Screenshots or video tutorials
Maintaining a central repository of these materials helps preserve institutional knowledge and reduces onboarding time for new staff.
Leveraging Feedback for Improvement
Staff feedback is a valuable resource when refining submission workflows. Encourage team members involved in VAT preparation to share their experiences with the bridging software, including any bottlenecks or suggestions for improvement.
Feedback loops allow businesses to:
- Identify areas of friction
- Update procedures or templates accordingly
- Communicate with software providers about needed features
A culture of continuous improvement ensures smoother VAT operations over time.
Ensuring Disaster Recovery and Backup
In the event of system failures or data loss, having a backup strategy is essential. Businesses should:
- Store VAT submission files in secure, backed-up folders
- Save copies of HMRC submission receipts
- Maintain local copies of spreadsheets or reports
Cloud-based bridging software may offer built-in backup, but it’s prudent to keep local copies to ensure access during internet outages or service disruptions.
Planning for Broader Digital Transformation
While bridging software addresses an immediate compliance need, it can also be a catalyst for broader financial system modernisation. The digitisation of VAT submissions may inspire businesses to digitise other areas, such as:
- Inventory management
- Payroll processing
- Budgeting and forecasting
- Expense tracking
Taking a phased approach ensures that changes are manageable and aligned with business capacity and goals.
External Accountant and Bookkeeper Collaboration
Bridging software can also improve collaboration with accountants or bookkeepers. Cloud-based tools with multi-user access or client portals allow professionals to:
- Upload and review spreadsheets
- Submit VAT returns on behalf of clients
- Track submission history
- Identify issues before they affect compliance
Businesses that outsource some of their finance functions can streamline communication and task allocation using these tools.
Avoiding Complacency
Finally, businesses should avoid becoming complacent with compliance. Using bridging software is not a set-and-forget solution. Regular review of both processes and regulations is key to ongoing success.
This includes keeping up with VAT threshold changes, filing frequency, exemptions, and sector-specific requirements that may affect how data is recorded or submitted.
Conclusion
Making Tax Digital for VAT represents a major shift in how UK businesses interact with the tax system. While the goal is to streamline compliance, reduce errors, and promote digital record-keeping, the transition has posed practical challenges, especially for businesses that rely on spreadsheets or legacy accounting systems.
Bridging software has emerged as a vital tool in this transition. It offers a practical, cost-effective solution for VAT-registered businesses that need to meet MTD obligations without overhauling their existing bookkeeping processes. Whether used temporarily during a transitional phase or adopted as a longer-term solution, bridging tools allow businesses to submit VAT returns in a fully compliant digital format while maintaining control over their internal workflows.
Across this series, we’ve examined the mechanics of how bridging software works, its many benefits, strategic implementation considerations, and its role in long-term digital planning. We’ve also explored how organisations can select the right software, roll it out effectively, and scale it as their business evolves.
However, bridging software is not a one-size-fits-all answer. It’s important for businesses to regularly review their compliance setup, stay informed about upcoming MTD expansions (including those for income and corporation tax), and evaluate whether more integrated systems may better serve their growing needs in the future.
By proactively managing digital compliance with the right tools and planning, businesses can not only meet regulatory demands but also improve operational efficiency, support data-driven decision-making, and build a robust foundation for the future of financial management.