This article explains what records you must keep if you’re a VAT-registered company. It also explains how to keep these documents in the best possible way.
Documents that must be kept
The most basic rule is that you must maintain regular business records. You are not required to keep records in a specific format, and most bookkeeping and computer systems will suffice.
Aside from keeping business records and meeting the special requirements, we ask that your records be accurate, up to date, and enable you to determine the amount of VAT you must pay or demand from us correctly.
There are two records that are needed for VAT purposes. There are the following:
In certain instances, the VAT account would be focused on a regular business record of VAT you owe or may demand a VAT invoice for supplies to other VAT-registered companies. A ‘VAT invoice’ is simply a word for an invoice that contains any details needed by the VAT laws, and most commercial invoices would already contain the right information.
You must keep all of your company records under VAT rule. Our perspective on business records is wide, and it will include the following:
- Benefit and loss reports, bank statements and paying-in slips, cash books and other account books are all included in annual accounts.
- Notes (credit or debit) – If you are registered in Northern Ireland, you issue or receive documentation relating to goods dispatches and acquisitions to or from the UK or EU member, or relating to dispatches and acquisitions made before 1 January 2020 if you are registered in Great Britain.
- Documents or certificates endorsing special VAT care, such as relief on supplies to visiting forces or zero-rating import and export documents by certificate
- Purchase and sales books, as well as orders and delivery notes
- Purchase invoices and sales invoices, as well as regular takings documents such as till rolls
- company correspondence that is important
Account for Value Added Tax
The definition of a business record varies depending on the type of business you operate. A VAT account and copies of invoices are required to be kept at all times, but some of the other records may not be standard in your industry. If this is the case, you are not required to keep such a record solely for VAT purposes. Some companies, on the other hand, can generate additional business records, which must be held and produced to HMRC when requested.
Keeping documents For VAT purposes, you must generally hold all of your business records for at least 6 years. You can need to keep records for longer periods of time if you use them for other tax purposes.
If the 6-year rule is causing you serious storage issues or unnecessary cost, or if you need help with records for other forms of taxes, you can contact VAT general enquiries. We may be able to give you permission to keep some records for a shorter period of time.
Not keeping or producing documents
Failure to maintain or produce the records needed by law carries a monetary penalty. Any penalty may be challenged in court or appealed to an independent tax tribunal.
A VAT account’s explanation
A VAT account serves as a connection (or audit trail) between your accounting records and your VAT return. A VAT account is required for any VAT-registered company, and it will assist you in filling out your VAT Return. However, as long as the information listed in this section is included, there is no fixed format for a VAT account.
Maintaining a VAT record
You can hold your VAT account in any format that fits your company as long as it contains the details mentioned below.
You must keep track of the following to demonstrate the relation between the production tax in your records and the output tax on your return:
the sales output tax you owe
the output tax you owe on acquisitions from EU member states if you’re registered in Northern Ireland, or on acquisitions made before 1 January 2020 if you’re registered in the United Kingdom the tax you’re supposed to pay on behalf of your supplier under the reverse charge process any other change required by the VAT rules
You must keep track of the following to demonstrate the relation between the input tax in your records and the input tax on your return:
the amount of input tax you’re allowed to deduct from business transactions
the input tax that you’re entitled to following a correction or error adjustment any other required adjustment if you’re registered in Northern Ireland or on acquisitions made before 1 January 2020 if you’re registered in Great Britain tax that you’re entitled to following a correction or error adjustment any other necessary adjustment if you’re registered in Northern Ireland or on acquisitions made before 1 January 2020 if you’re registered in Great Britain
Illustration of a VAT account
Although there is no one-size-fits-all approach to keeping your VAT account, you might find the example for a quarterly trader helpful. You’ll need to change this if you pay for VAT on a monthly or annual basis.
From the 1st of January to the 31st of March
VAT you were paying on your sales £ Input tax £ Output tax £
You paid VAT on your sales.
Making changes to your VAT account
You can need to make a VAT account change if you:
enable or earn a VAT-inclusive credit
use an authorised estimation method to make an annual change to the retail scheme
a partial exemption or a capital goods scheme adjustment is required
submit an application for bad debt relief
VAT Notice 700/45: How to Correct VAT Errors and Make Changes or Claims explains how to correct a net mistake made on previous returns.
Completing the VAT Return
You will fill out your VAT Return using the statistics from your VAT account. You have one month from the end of your accounting period to give us your return and any payments due. This is referred to as the ’standard’ due date. For companies using the annual accounting program, this is extended to two months (see VAT Notice 732: annual accounting).
You can register to apply electronic VAT Returns instead of paper returns if you have access to a computer. If you pay your return electronically, you’ll usually have more time after the regular due date to get both your return and payment to us.
The significance of VAT invoices
The VAT invoices you send out are an essential part of your business records, and you must keep a copy of each one.
Similarly, the VAT invoices you get are the primary proof you’ll use to recover VAT you’ve paid as input tax, so make sure you store them in a way that makes it easy to find them when needed.
VAT invoices are important to your business customers because they are the primary proof that they can use to recover the VAT you have paid.
Invoices sent electronically
In comparison to paper invoicing, electronic invoicing has a number of advantages. Electronic document transmission in a safe environment will ensure:
data that is well-structured for efficient auditing
improved order traceability
Paper records are being phased out, which may save money on storage and handling.
fast retrieval and access
Enhanced cash flow security and simplified conflict resolution
For more detail on the laws that apply to electronic invoicing, see VAT Notice 700/63: electronic invoicing.
Specific information to provide on a VAT invoice
Any VAT invoices you send out must include the following information:
a sequential number derived from one or more series that uniquely identifies the document at the time of supply and on the date of issue (where different to the time of supply)
the supplier’s name, address, and VAT registration number; the individual to whom the products or services are deliverer’s name and address
a sufficient description to identify the goods or services supplied for each description, the quantity of goods or scope of services, and the rate of VAT and the amount payable, excluding VAT, expressed in any currency the gross total amount payable, excluding VAT, expressed in any currency the rate of any cash discount offered the total amount of VAT chargeable, expressed in sterling
Invoices given under a margin scheme or subject to a reverse fee are subject to special laws. For such supplies, you must adhere to the rules.