Making Tax Digital for VAT has applied to all VAT-registered businesses since April 2022. The rule is simple to state: keep VAT records digitally and submit returns through compatible software, using HMRC's API. The difficulty is that an ERP which was designed around exports and spreadsheets often breaks the chain without anyone noticing.
What the software has to do
- Hold the required VAT records digitally, including the data about each supply
- Preserve digital links, so figures move between software without manual retyping
- Prepare the VAT return from those records
- Submit the return to HMRC through its API, and receive confirmation
The digital-links trap
The most common failure is not the submission. It is a spreadsheet in the middle of the process where someone copies figures out of the ERP, adjusts them and pastes them into the filing tool. Copy and paste breaks the digital link. Where manual adjustments are needed, they should be made inside software that keeps the audit trail, not in a detached file.
Checklist for your current ERP
- Records. Does every invoice and credit note hold VAT rate, amount and supply details in structured fields?
- Reports. Can the VAT return boxes be produced directly from the system, without an intermediate spreadsheet?
- Submission. Does the system, or a connected bridging product, submit through HMRC's API?
- Audit trail. Can you show who changed a figure and when?
- Accounting link. Do invoices reach Xero, Sage or QuickBooks without re-keying?
Build, buy or bridge
If your ERP is off the shelf and compliant, you may need nothing. If it is a custom or older system, the choices are to add direct HMRC integration, to connect it to a compatible accounting product through an API, or to use a bridging tool. The right answer depends on volumes and how much the ERP already does. A short scoping exercise should say which, before any build begins.
Beyond VAT
Making Tax Digital is also being extended to Income Tax Self Assessment in phases from April 2026, depending on income level. If you serve sole traders or landlords, check the current HMRC guidance and thresholds, since these have been adjusted over time.