What is a compatible software for Making Tax Digital?
Answered 11 March 2026
What is Compatible Software for Making Tax Digital?
What the law says
Under the Making Tax Digital (MTD) regulations, "functional compatible software" is defined as a software program or set of compatible software programs whose functions include:
- (a) recording and preserving digital records in a digital form;
- (b) providing HMRC with quarterly updates by using the API platform; and
- (c) receiving information from HMRC using the API platform in relation to a relevant person's compliance obligations.
Software must also comply with any conditions set out in a "software notice" (a general direction given by HMRC specifying conditions with which functional compatible software must comply).
HMRC Guidance / Practice
HMRC describes compatible software (referred to as "functional compatible software") as a software program, set of programs, product, or application that must be able to:
- Record and preserve digital records
- Provide HMRC with information and returns from data held in those digital records, via the API platform
- Receive information from HMRC via the API platform
Key points from HMRC guidance:
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A single program is not always required. Some software (e.g. a spreadsheet) can record and preserve digital records but may not be able to send/receive data via an API. Such software can still qualify as a component of functional compatible software if used together with one or more other programs that perform the remaining functions.
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Digital records do not need to be held in one place. They can be kept across a range of compatible digital formats, which together form the digital records for the VAT-registered entity.
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Bridging software can also be used — for example, a VAT spreadsheet linked to bridging software that submits returns via the API platform can constitute a compliant set of functional compatible software.
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All VAT-registered businesses are required to keep VAT records and submit VAT Returns using compatible software.
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A list of HMRC-recognised functional compatible software for Making Tax Digital for VAT is available on the HMRC website.
In summary: Compatible software for MTD is any software (or combination of software) that can digitally record and preserve records, submit returns to HMRC via the API, and receive information back from HMRC via the API. It does not have to be a single product — a spreadsheet combined with bridging software, for example, can qualify.
Citation sources
All VAT registered businesses should now be signed up for Making Tax Digital for VAT. You no longer need to sign up yourself. HMRC will sign up all new VAT registered businesses to Making Tax Digital for VAT automatically unless they are already exempt or have applied for exemption. You should now keep VAT records and submit VAT Returns using compatible software. Find software that’s compatible with Making Tax Digital for VAT.
7.2, and it forms the start of the electronic account and functional compatible software. The digital link requirement for purchase data starts in the VAT spreadsheet because this meets the requirements set out in paragraph 7.4. This is a compliant journey because: the VAT spreadsheet provides HMRC with information and VAT Returns using a bridging software, from data held in digital records, using the API platform the bridging software allows the business to receive information from HMRC using t
Functional compatible software is: a software program or set of software programs a product or set of products an application or set of applications It must be able to: record and preserve digital records provide HMRC information and returns from data held in those digital records, using the API platform receive information from HMRC, using the API platform If software you use has all of these functions, the digital links rules in paragraph 10 may not be relevant to you. Some software programs w
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . e to provide corrections to digital records under Part 6. 2 Where a relevant person has received notice to file for a year of assessment under section 8 of TMA 1970 and is required to file an end of period statement for that tax year , that person may use functional compatible software to comply with the duty to file the things mentioned in subsection (1AB)(a) for that year . 3 “Functional compatible software” means a software program or