What is bridging software?

Definition of bridging software

Bridging software is a tool which links business records to HMRC’s systems in an Making Tax Digital (MTD)-compatible manner.

The government’s MTD initiative requires affected businesses to submit their VAT returns and to report their income and expenses to HMRC digitally. Keeping records via spreadsheets and manually entering the resulting numbers on HMRC’s website is not sufficient to meet the requirements of MTD.

Cloud accounting software, such as FreeAgent, provides an all-in-one solution for maintaining and submitting MTD-compatible reports. However, businesses that choose to keep their records via other methods, such as spreadsheets, require additional software in order to submit their VAT, and their income and expenses reports, returns in a compliant manner.

Bridging software provides a digital link between data stored in spreadsheets and HMRC’s portals. This link allows the data to be submitted digitally, making the reporting compatible with MTD.

On its own, however, bridging software does not fulfil the other requirements of MTD, such as digital record keeping and maintaining digital links between data. Additionally, you or your accountant may have to perform further calculations to get spreadsheet data into the format required by the bridging software.