VAT records – What do you need to keep?

If you are registered for VAT, you will need to keep normal business records. The records must be complete, up to date and sufficient to enable you to calculate the VAT due to or due from HMRC. You will also need to maintain a VAT account and keep copies of your VAT invoices.

Business records

HMRC take a wide view of what constitutes ‘business records’ and their list includes:

  • annual accounts, including a profit and loss account;
  • bank statements and paying-in slips;
  • cash books and other account books;
  • purchase invoices;
  • copy sales invoices;
  • credit or debit notes issued or received;
  • orders and delivery notes;
  • purchase and sales books;
  • records of daily takings, such as till rolls;
  • import and export documents;
  • relevant business correspondence; and
  • any documents or certificates supporting special VAT treatment.

The precise records that need to be kept will depend on the type of business. However, all businesses will need to maintain a VAT account and keep copies of invoices.

If your business is registered in Northern Ireland, you must also keep any documentation relating to dispatches and acquisitions of goods to or from the UK or an EU member state.

VAT account

The VAT account forms the link between the business records and the VAT return and all VAT-registered businesses must keep a VAT account. To comply with MTD, it must be kept digitally; either within a software package or on a spreadsheet.

To show the link between the output tax in your records and the output tax shown on your VAT return, you must keep a record of:

  • the output tax owed on sales;
  • if your business is registered in Northern Ireland, the output tax owed on acquisitions from EU member states;
  • the tax required to be paid on behalf of a supplier under a reverse charge procedure;
  • tax that must be paid following a correction or adjustment for an error; and
  • any other adjustments required by the VAT rules.

You must also keep a record of the following in order to show the link between the input tax in your records and the input tax shown on your VAT return:

  • the input tax claimed on business purchases;
  • if your business is registered in Northern Ireland, the input tax allowable on acquisitions from EU member states;
  • any tax that can be recovered following a correction or an adjustment for an error; and
  • any other necessary adjustments.

Need to keep digital records

To comply with the requirements of MTD for VAT, VAT-registered businesses must maintain certain records digitally and keep their accounts within ‘functional compatible software’. This is a software program or set of software programs, a product or set of products or an application or set of applications which are able to:

  • record and preserve digital records;
  • provide HMRC with information and returns from data held in those digital records via an API (application programming interface) platform; and
  • receive information from HMRC using the API platform.

Where data is transferred between software, applications or products (for example, from a spreadsheet to the VAT return software), this must be via a digital link.

VAT invoices        

VAT invoices issued are an important part of the business records, while VAT invoices received are the primary evidence for recovering VAT. Copies must be kept of all VAT invoices issued and received.

Maintaining records

The general rule is that business records for VAT purposes should be kept for at least six years.

Partner note:

Value Added Tax Regulations 1995, reg. 31; VAT Notice 700/21.

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