Yes. Odoo can keep your VAT records and file your VAT return to HMRC under Making Tax Digital. The UK localisation adds a UK chart of accounts and ready-made VAT codes, and the UK – Accounting Reports module connects to HMRC, imports your VAT obligations and sends the 9-box return. Direct submission is part of Odoo Enterprise, not the free Community edition.
Summary: Since the first VAT period starting on or after 1 April 2022, every VAT-registered business in the United Kingdom must keep digital VAT records and submit VAT returns through functional compatible software, unless HMRC has granted an exemption. Odoo meets this through two pieces. The UK – Accounting module (l10n_uk) installs a UK chart of accounts and VAT codes for standard, reduced, zero-rated, exempt, domestic reverse charge, international reverse charge and postponed import VAT. The UK – Accounting Reports module (l10n_uk_reports) builds the VAT return and sends it to HMRC: you click Connect to HMRC once, import your open obligations, pick the period and click Send to HMRC. Odoo only retrieves open obligations from the last three months, so very late returns must be handled with HMRC directly. The submission module is not in the Community source code, so plan for Odoo Enterprise if you want to file from Odoo itself.
Who must use Making Tax Digital for VAT
Making Tax Digital (MTD) for VAT started in April 2019 for businesses with taxable turnover above the VAT registration threshold. HMRC extended it to all VAT-registered businesses from their first VAT period starting on or after 1 April 2022, regardless of turnover. The registration threshold itself is now £90,000 of taxable turnover over the last 12 months.
HMRC’s guidance states that all VAT-registered businesses should now be signed up and that you no longer need to sign up yourself. You must use MTD unless HMRC has agreed an exemption. VAT Notice 700/22 lists the grounds:
- it is not practical for you to use digital tools, for example because of age, disability or location (digital exclusion)
- the business is subject to an insolvency procedure
- the business is run entirely by practising members of a religious society whose beliefs are incompatible with electronic communications
For VAT periods starting on or after 1 January 2023, each late return earns a penalty point. A quarterly filer who reaches 4 points pays a £200 penalty, and another £200 for each further late return while at the threshold. Monthly filers hit the threshold at 5 points and annual filers at 2.
What “functional compatible software” and “digital links” mean
VAT Notice 700/22 defines functional compatible software as a program, or set of programs, that can record and preserve digital records, send information and returns to HMRC through its API platform, and receive information back from HMRC. Odoo can do all three in one system.
The digital records you must keep
- Designatory data: business name, principal place of business, VAT registration number and any VAT accounting schemes you use.
- Supplies made: time of supply, value excluding VAT and the rate of VAT charged.
- Supplies received: time of supply, value and the input tax you will claim.
- Summary data: the totals that feed the return, with each type of adjustment on its own line.
Odoo invoices, bills and journal entries hold this information once the company record and taxes are set up.
Digital links
If your records pass through more than one program, the transfer between them must be a digital link: an electronic transfer or exchange of data. HMRC accepts linked spreadsheet cells, XML and CSV import and export, file upload and download, and API transfers. It does not accept “cut and paste” or “copy and paste” as a digital link, and manual re-keying between programs breaks compliance too.
Importing a CSV of online sales into Odoo is fine. Retyping totals from a spreadsheet is not.
How Odoo submits your VAT return to HMRC
Odoo’s United Kingdom fiscal localisation documentation describes the full flow. Here is what it confirms.
1. Install the UK modules
| Module | Technical name | What it does |
|---|---|---|
| UK – Accounting | l10n_uk | CT600-ready chart of accounts and VAT100-ready tax structure |
| UK – Accounting Reports | l10n_uk_reports | UK reports and sending the tax report to HMRC through the MTD-VAT API |
| UK – HMRC API | l10n_uk_hmrc | The shared HMRC basics |
| UK – Construction Industry Scheme | l10n_uk_reports_cis | CIS Deduction (GB) report and CIS monthly returns to HMRC |
| UK BACS Payment Files | l10n_uk_bacs | Bacs files for bill and invoice payments |
Only UK-based companies can submit reports to HMRC from Odoo.
2. Connect to HMRC once
Go to Accounting > Reporting > Tax report and click Connect to HMRC. You are taken to HMRC to sign in and grant Odoo authority. You only need to do this once per company. GOV.UK notes that the authority you give compatible software lasts 18 months, so expect to reconnect from time to time.
3. Import obligations and send the return
Each period, import your obligations from HMRC, filter on the period you want to submit, and click Send to HMRC. The return follows HMRC’s nine boxes: output VAT (box 1), VAT on Northern Ireland acquisitions from the EU (box 2), total VAT due (box 3), VAT reclaimed (box 4), net VAT (box 5), and net values of sales, purchases and Northern Ireland EU movements (boxes 6 to 9).
Watch the three-month limit. Odoo only retrieves open obligations from the last three months. If a return is more than three months late, you cannot submit it through Odoo and must contact HMRC.
4. Test before you go live
You can rehearse the whole flow with test credentials from the HMRC Developer Hub. Activate developer mode, open Settings > Technical > System Parameters, find l10n_uk_reports.hmrc_mode and set it to demo. Set it back before filing for real.
5. Several UK companies in one database
Only one company and one user can be connected to HMRC at a time. Before each submission for another company, switch to it, open the connected user’s UK HMRC Integration tab, click Reset or Remove Authentication Credentials, reconnect that company and submit.
Fraud prevention headers
HMRC requires by law that software using the VAT (MTD) API sends fraud prevention header data with each call. This is the software provider’s duty, and Odoo’s UK documentation lists no fraud prevention settings for users to maintain.
UK chart of accounts and VAT codes in Odoo
Installing UK – Accounting creates the UK chart of accounts and taxes, already mapped to the accounts and report lines the VAT return uses. You review the chart under Accounting > Configuration > Chart of Accounts, and set default taxes and the tax return periodicity under Accounting > Configuration > Settings > Taxes. The default UK tax list in Odoo 19 and Odoo 20 includes:
| Odoo tax | Used on | Typical use |
|---|---|---|
| 20% | Sales | Standard-rated sales |
| 20% G / 20% S | Purchases | Standard-rated purchases of goods / services |
| 5% | Sales and purchases | Reduced-rated supplies |
| 0% | Sales | Zero-rated sales |
| Exempt | Sales and purchases | VAT-exempt supplies |
| 0% RC (Reverse Charge, Domestic) | Sales | Sales where your customer accounts for the VAT |
| 20% RC (Reverse Charge, Domestic) | Purchases | Purchases where you account for the VAT |
| 20% RC EX (Reverse Charge, International) | Purchases | Services bought from overseas suppliers |
| 20% PVA (Postponed Import VAT) | Purchases | Imported goods under postponed VAT accounting |
| 0% EX | Sales and purchases | Sales and purchases with the rest of the world |
| 0% / 20% EU (NIR) | Sales and purchases | Northern Ireland movements of goods with the EU |
Domestic reverse charge for construction
Since 1 March 2021, the VAT domestic reverse charge applies to building and construction services when the customer is VAT registered, the services fall within the Construction Industry Scheme (CIS) and they are standard or reduced rated. Odoo’s domestic reverse charge taxes cover this: the subcontractor invoices with the 0% RC sales tax, and the contractor records the bill with the 20% RC purchase tax, so the contractor accounts for the VAT instead of paying it to the supplier. Post a test invoice and bill and check which boxes they reach before you rely on the setup. CIS deductions themselves (0%, 20% or 30%) are separate taxes that come with the UK – Construction Industry Scheme module, which also sends CIS monthly returns to HMRC.
Postponed VAT accounting on imports
Under postponed VAT accounting, import VAT goes in box 1 and the reclaimable amount in box 4, both taken from your monthly postponed import VAT statement, with the net value of imports in box 7. In Odoo, apply the 20% PVA tax to the import bill or entry and reconcile the period total to the HMRC statement before you submit.
Cash accounting, accrual and the Flat Rate Scheme
Odoo’s UK taxes work on an accrual (invoice) basis by default: VAT counts when the invoice or bill is posted. That suits most businesses, but two HMRC schemes change the timing or the maths.
Cash Accounting Scheme
You can join if estimated VAT taxable turnover for the next 12 months is £1.35 million or less; you must leave above £1.6 million. You pay VAT on sales when customers pay you and reclaim VAT on purchases when you pay suppliers. Odoo supports this with cash basis taxes: enable Cash Basis under Accounting > Configuration > Settings > Taxes, set each tax’s Tax Exigibility to Based on Payment with a transition account, and run the tax report with the cash basis option. VAT then reaches the return only when the invoice is reconciled with a payment.
Flat Rate Scheme
The Flat Rate Scheme is open to businesses with VAT turnover of £150,000 or less, excluding VAT, and cannot be combined with cash accounting. Odoo’s default UK tax list has no flat-rate tax. VAT Notice 700/22 says that if your software has no flat-rate setting, you can record each supply as one standard-rated and one zero-rated supply, or record it at one rate and correct the VAT with an end-of-period adjustment. Agree the method with your accountant before you configure it.
Checking the return before you submit
A filed return is hard to unwind, so build a short review into every period. In Odoo 20, the Tax Returns view lists each pending return with Review, Submit and Pay steps and runs automatic checks, including:
- Draft entries: unposted invoices and bills in the period must be posted or re-dated.
- Bill attachments: bills should carry the supplier document as proof.
- Company data: a missing VAT number or country can break the report.
- Taxes and countries matching: taxes on documents must fit the customer’s country.
- No negative amounts and optional bank matching to spot missing bills.
Clicking Validate posts the VAT closing entry and moves the Lock Tax Return date forward. Anything dated in a locked period afterwards has its VAT pushed into the next open period, so filed figures stay intact. Before sending, also compare boxes 1 and 4 with your VAT control accounts and query any large swing against last quarter.
Common MTD mistakes in Odoo
- Wrong tax on the line. A product with the wrong default tax repeats the error on every invoice. Review product and supplier defaults at go-live.
- Charging 20% on construction work that should be reverse charged, or the reverse, because the customer’s CIS status was never recorded.
- Missing postponed import VAT because imports were posted without the PVA tax.
- Broken digital links, such as retyping totals from a spreadsheet or another system instead of importing a file.
- Leaving it too late. Odoo cannot send returns more than three months overdue, and late returns earn penalty points.
- Multi-company confusion, filing while connected as the wrong company.
- Scheme mismatch, running accrual taxes when you are registered for cash accounting, or the other way round.
- Messy opening balances after a migration, so the first Odoo return includes VAT that was already declared in the old system.
The last point is where most problems start. Our Sage to Odoo migration guide and Xero to Odoo migration guide explain how to set a clean VAT cut-over date.
Odoo Enterprise vs Community for MTD
The UK – Accounting module, with the chart of accounts and VAT codes, is part of Odoo’s open-source Community code. The UK – Accounting Reports module that builds the VAT return and talks to HMRC is not in the Community source code; it ships with Odoo Enterprise. Odoo announced in 2019 that its HMRC module was recognised by HMRC for MTD.
In practice, if you want to file VAT returns from Odoo itself, budget for an Enterprise subscription. A Community user would need separate bridging software, linked digitally, to send the return. You can check current listings on HMRC’s software finder for MTD for VAT. For licence and project budgets, see our Odoo cost guide for the UK.
MTD for Income Tax: does it affect Odoo users?
MTD for Income Tax is a separate regime for sole traders and landlords registered for Self Assessment. According to GOV.UK’s eligibility guidance, the start date depends on qualifying income from self-employment and property:
| Qualifying income in tax year | Above | Must use MTD for Income Tax from |
|---|---|---|
| 2024 to 2025 | £50,000 | 6 April 2026 |
| 2025 to 2026 | £30,000 | 6 April 2027 |
| 2026 to 2027 | £20,000 | 6 April 2028 |
Partnerships will follow at a date not yet set. Limited companies pay Corporation Tax, not Self Assessment income tax, so this regime does not change how a company files VAT from Odoo. Odoo’s UK documentation covers VAT and CIS submissions to HMRC, not MTD for Income Tax. If you are a sole trader or landlord in scope, confirm your software against HMRC’s list for Income Tax rather than assuming your VAT setup covers it.
MTD readiness checklist
| Check | Where in Odoo | Ready when |
|---|---|---|
| Company VAT number, address and country | Settings > Companies | All fields complete and match HMRC records |
| UK modules installed | Apps | UK – Accounting and UK – Accounting Reports active |
| Tax return periodicity | Accounting > Configuration > Settings > Taxes | Matches your HMRC VAT periods |
| VAT scheme | Tax settings and tax exigibility | Accrual or cash basis matches your registration |
| Product and supplier tax defaults | Products, contacts, fiscal positions | Sample invoices land in the right boxes |
| Reverse charge and CIS | Taxes, contact HMRC details | Construction customers and subcontractors flagged |
| Import VAT | Purchase taxes | PVA used on imports and tied to the HMRC statement |
| Opening balances | Accounting Import | VAT control accounts agree with the last return filed elsewhere |
| Digital links | Imports and integrations | No manual re-keying from other systems |
| HMRC connection | Accounting > Reporting > Tax report | Demo test passed, live connection made |
| Review routine | Tax Returns view | Checks passed, lock date set, return filed on time |
If you are still choosing a system, our Odoo vs Sage comparison and Odoo vs Xero comparison cover how VAT and reporting differ. If you have chosen Odoo, our Odoo implementation services in the UK set up the localisation, taxes and HMRC connection. Our Odoo consulting team can review an existing VAT configuration, Odoo migration services handle moves from older systems, and Odoo training covers the period-end routine. See all our Odoo services in the UK.
OzonLayer is an official Odoo Silver Partner with three Odoo 18 certified consultants and a UK company, OzonLayer IT Services Limited. If you want a second pair of eyes on your VAT setup before the next quarter, book a free consultation or call +44 7477 204638.
Frequently asked questions
Is Odoo compatible with Making Tax Digital for VAT?
Yes. With the UK – Accounting Reports module, Odoo keeps digital VAT records, imports your obligations from HMRC and sends the VAT return through the MTD-VAT API. Odoo announced in 2019 that its HMRC module was recognised by HMRC. You connect once from the tax report with Connect to HMRC, then submit each period with Send to HMRC.
Can I submit VAT returns to HMRC from Odoo Community?
Not directly. Odoo Community includes the UK chart of accounts and VAT codes, but the UK – Accounting Reports module that builds the return and connects to HMRC is not in the Community source code and ships with Odoo Enterprise. A Community user would need separate bridging software, linked digitally, to file the return.
Does every VAT-registered business have to use MTD?
Yes, unless HMRC grants an exemption. MTD for VAT has applied to all VAT-registered businesses from their first VAT period starting on or after 1 April 2022, whatever their turnover. Exemptions cover digital exclusion, insolvency procedures and businesses run entirely by members of certain religious societies. HMRC says you no longer need to sign up yourself.
Can Odoo submit a VAT return that is several months late?
Only if it is no more than three months late. Odoo retrieves open obligations from the last three months, so an older return cannot be sent through Odoo and you must contact HMRC. Late returns also earn penalty points; a quarterly filer pays a £200 penalty on reaching 4 points.
Does Odoo handle the construction domestic reverse charge and CIS?
Yes. The UK taxes include a 0% RC sales tax and a 20% RC purchase tax labelled Reverse Charge (Domestic), used for construction services within CIS supplied to VAT-registered customers. CIS deductions at 0%, 20% or 30% and CIS monthly returns to HMRC come with the separate UK – Construction Industry Scheme module.
Can I use the VAT Cash Accounting Scheme in Odoo?
Yes. Enable Cash Basis in the tax settings, set your taxes to Based on Payment with a transition account, and run the tax report with the cash basis option. VAT then reaches the return only when invoices and bills are paid. The scheme is open to businesses with taxable turnover of £1.35 million or less.
Do I need Odoo for MTD for Income Tax?
MTD for Income Tax applies to sole traders and landlords, starting from 6 April 2026 for qualifying income above £50,000 in 2024 to 2025, then £30,000 and £20,000 thresholds in later years. Limited companies are not affected. Odoo's UK documentation covers VAT and CIS, not Income Tax, so check HMRC's software list if you are in scope.
How long does it take to set up MTD in Odoo?
For a single UK company on Enterprise, installing the modules and connecting to HMRC is quick. The real work is checking tax defaults on products and contacts, setting the right VAT scheme, loading clean opening balances and testing a return in demo mode. Allow time for that review before your first live filing.