VAT records for UK businesses

VAT records need to be organised enough to support the VAT return and explain how the figures were calculated. For many businesses, this now means keeping key VAT records digitally and filing VAT returns through compatible software.

What VAT records should include

VAT registered businesses must keep records of what they buy and sell, including zero rated, reduced rated and exempt items. They should keep copies of sales invoices, purchase invoices, credit notes, debit notes, self billing agreements and general business records such as bank statements.

The VAT records should support the VAT charged to customers, VAT reclaimed on purchases and the final VAT return submitted to HMRC.

Making Tax Digital and digital VAT records

GOV.UK guidance says Making Tax Digital for VAT requires VAT registered businesses to keep records digitally and file VAT returns using software, unless an exemption applies.

The full set of digital records does not always need to sit in one software package, but the digital journey should be clear. Where different software is used, digital links may be required between systems.

Invoices and evidence

VAT claims should be supported by proper evidence. Businesses should keep purchase invoices and receipts, and check whether VAT has been correctly charged before reclaiming it. Not every supplier receipt includes VAT, and not every cost is fully reclaimable.

Sales invoices also need to be consistent. The VAT rate, customer details, invoice date, supply date and description should all support the VAT treatment used.

Checks before submitting a VAT return

A good VAT process includes review checks before submission. This might include checking bank reconciliations, large transactions, missing invoices, unusual VAT rates, reverse charge items, imports, exports, private use and any transactions posted to suspense or uncategorised accounts.

Common VAT record problems

Common issues include claiming VAT without a valid invoice, using the wrong VAT rate, mixing business and personal costs, forgetting credit notes, misposting bank transfers as sales or purchases, and leaving bookkeeping unreconciled until the VAT deadline.

Durja Associates helps VAT registered businesses keep clearer records, review VAT coding and submit VAT returns with a more organised digital process.