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What records do you need to keep for VAT purposes?

Many business become VAT registered and are then unsure of what VAT records they need to keep and issue, and how long for.  Our simple guide below breaks it down for you:

How to keep VAT records:

You must keep VAT records for at least 7 years (the current year plus the 6 previous years).  They can be kept on paper, digitally/electronically or as part of a software program (eg book-keeping software).

If you’ve lost a VAT invoice or it is damaged and no longer readable, ask the supplier for a duplicate.

VAT Sales Invoices

In most instances, you’ll issue a full VAT invoice for your transactions. But you can also use:

  • a modified invoice for retail supplies over £250
  • a simplified invoice for retails supplies under £250 – and for other supplies from 1 January 2013

What needs to be included on the sales invoice?

Invoice information Full invoice Simplified invoice Modified invoice
Unique invoice number that follows on from the last invoice Yes Yes Yes
Your business name and address Yes Yes Yes
Your VAT number Yes Yes Yes
Date Yes No Yes
The tax point (or ‘time of supply’) if this is different from the invoice date Yes Yes Yes
Customer’s name or trading name, and address Yes No Yes
Description of the goods or services Yes Yes Yes
Total amount excluding VAT Yes No Yes
Total amount of VAT Yes No Yes
Price per item, excluding VAT Yes No Yes
Quantity of each type of item Yes No Yes
Rate of any discount per item Yes No Yes
Rate of VAT charged per item – if an item is exempt or zero-ratedmake clear no VAT on these items Yes Yes (1) Yes
Total amount including VAT No Yes (1) Yes

(1) If items are charged at different VAT rates, then show this for each.

Selling internationally

It’s not necessary to show all amounts on your invoices in sterling. If you issue VAT invoices in a foreign currency or language, you must:

  • show the total VAT payable in sterling on your VAT invoice if the supply takes place in the UK
  • be able to provide an English translation of any invoice within 30 days if asked to do so by a visiting VAT officer

To convert to sterling you can:

VAT Records to keep

Records you must keep include:

  • copies of all invoices you issue
  • all invoices you receive (originals or electronic copies)
  • self-billing agreements – this is where the customer prepares the invoice
  • name, address and VAT number of any self-billing suppliers
  • debit or credit notes
  • import and export records
  • records of items you can’t reclaim VAT on – eg business entertainment
  • records of any goods you give away or take from stock for your private use
  • records of all the zero-rated, reduced or VAT exempt items you buy or sell
  • VAT account

General business records such as bank statements, cash books, cheque stubs, paying-in slips and till rolls must also be retained.

If you use the Cash Accounting Scheme you must use these records to match them against your payment records and receipts.

VAT Account

You must keep a separate record of the VAT you charge and the VAT you pay on your purchases. This record is called a ‘VAT account’ and you use the figures in your VAT account to complete your VAT Return.

There aren’t any rules on what a VAT account should look like, but it must show:

  • your total VAT sales
  • your total VAT purchases
  • the VAT you owe HM Revenue and Customs (HMRC)
  • the VAT you can reclaim from HMRC
  • if your business uses the VAT Flat Rate Scheme – the flat rate percentage and turnover it applies to
  • the VAT on any EU acquisitions (purchases) or dispatches (sales)

What happens if I don’t?

HMRC can visit your business to inspect your records at any time and can issue a penalty if they are not in order.

Using a system a computerise accounting system like Xero will take of a lot of these issues automatically and without much effort so if you are VAT registered it’s worth considering a move.

For more information on VAT record keeping, check the HMRC website here, or contact us on the details above.