What is Making Tax Digital?

In practice, in the UK

Making Tax Digital applies first and most fully to VAT, requiring registered businesses to keep their records in digital form and to submit returns using software that connects to HMRC’s systems, rather than keying figures into a web form. The obligation covers not just the final submission but the whole record-keeping chain behind it: sales and purchase data, VAT account entries and the return itself all need to sit inside a digital environment that HMRC can, in principle, follow end to end. Later phases extend similar digital record-keeping duties to other taxes, following the same logic rather than starting from scratch. For a business, the practical effect is that spreadsheets and manual re-entry become a compliance risk rather than a convenience.

In Odoo

Odoo is built to keep VAT records digitally by design, since every invoice, credit note and tax adjustment already lives in the ledger before the return is generated. The obligation is less about the software producing correct VAT arithmetic — most systems can do that — and more about proving that nothing was retyped between the ledger and HMRC: Odoo’s built-in VAT return connects directly to the accounts, without a spreadsheet export in between, which is the point Making Tax Digital was designed to enforce.

Common mistakes

• Treating Making Tax Digital as a software purchase rather than a change to how records are kept day to day.
• Exporting VAT figures to a spreadsheet to adjust them before filing, which breaks the digital chain even if the final number is correct.
• Assuming the obligation only touches the VAT team, when sales, purchasing and banking data all feed into it.