What counts as MTD-compatible software?

In practice, in the UK

Compatibility has two separate parts, and businesses often check only one. The first is functional: can the software calculate VAT correctly from the underlying transactions? Most established accounting software manages this without difficulty. The second, and the one Making Tax Digital actually tests, is connective: can the software keep records digitally, maintain digital links through to the return, and submit that return to HMRC without manual intervention along the way? A spreadsheet can pass the first test and fail the second, which is why HMRC recognises bridging software as a distinct category — a thin layer that takes figures already computed elsewhere and submits them digitally, closing the gap without replacing the underlying system.

In Odoo

Odoo submits VAT returns to HMRC directly from its own accounting module, so the question of compatibility rarely arises for a business running entirely inside it. It becomes relevant where a company keeps part of its records outside Odoo — a point-of-sale system, a separate payroll package, or a legacy tool retained for one process — and needs to check that the connection between that system and Odoo’s ledger is itself digital, rather than a manual export and import.

Common mistakes

• Assuming any accounting package is automatically MTD-compatible because it can calculate VAT.
• Relying on bridging software as a permanent fix rather than a stopgap while a manual process is replaced.
• Forgetting to check compatibility for satellite systems that feed figures into the main ledger.