Need to know facts about VAT record keeping

 
 
 

Need to know facts about VAT record keeping

VAT-Registered businesses must create and keep business records either by bookkeeping or using computer systems. These records must be complete and up to date to allow you to calculate the correct amount of VAT that you need to pay or can claim from HMRC.

VAT Records

  • Copies of all invoices issued

  • All invoices received (originals/electronics)

  • Self-billing agreements

  • Name, address, and VAT numbers of any self-billing suppliers

  • Debit/credit notes

  • Import and export records

  • Records of items that cannot reclaim VAT on

  • Records of any good you give away/take from stock for your private use

  • Records of all the zero-rated, reduced or VAT exempt items you buy or sell

  • A VAT account

In addition to all of this, bank statements, cash books, cheque stubs, paying-in slips, and till rolls must also be kept.

 Making Tax Digital (MTD)

From April 2019 onwards, all VAT registered businesses with a taxable turnover of £85,000 must follow rules for ‘Making Tax Digital (MTD) for VAT’, as the government aims to make the collection of VAT all digital.

* From 1 April 2022 onwards, all VAT registered businesses must sign up to MTD regardless of how much they earn.

Digital Links

This is essential when complying with the MTD system. Businesses would need a ‘compatible software package’ that can link with HMRC

  • Qualifying digital links should be:

  • Transferable electronically between programs, products, or applications

  • The process of transfer should be automated.

  • Some ways you can link your software include:

  • Using formulas to link cells in spreadsheets

  • Emailing records

  • Records on a portable device

  • Importing and Exporting XML and CSV files

  • Downloading and uploading files

  • API transfer

*You must have links between the software you use by your first VAT period after 1 April 2021.

 

VAT Records (MTD)

Here are the records you would have to keep digitally:

  • Business name, address, and VAT registration number

  • Any VAT accounting schemes you use

  • VAT on goods and services you supply

  • VAT on goods and services you receive

  • Any adjustments you make to a return

  • ‘Time of supply’ and ‘value of supply’ (value excluding VAT) for everything you buy and sell

  • Rate of VAT charged on goods and services you supply

  • Reverse charge transactions

  • Total daily gross takings if you use a retail scheme

  • Items you can reclaim VAT on if you use the Flat Rate Scheme

  • Total sales, and the VAT on those sales

Exemptions

This means keeping some records digitally unless:

  •  Your business uses VAT GIANT service – part of a government department/NHS trust

  •  Apply for exemption

  • Automatically exempt if

  •  Taxable turnover has not exceeded £85,000 since April 2019

  •  Already exempt from filing VAT Returns online

  •  You or the business are subject to an insolvency procedure

Apply for an exemption due to:

  • Age/disability/where you live

  • Object to using computers on religious grounds

  • Any other reasons why it’s not reasonable/practical

*From 1 April onwards, all VAT registered businesses must sign up regardless of how much they earn through tax.

VAT account

A separate record of all the VAT charges you have charged and paid on purchases. This includes:

  • Total VAT sales

  • Total VAT purchases

  • VAT owed to HMRC

  • VAT you can reclaim from HMRC

  • Flat rate percentage and turnover from VAT Flat Rate Scheme (if applicable)

  •  

VAT Bad Debt Account

If an invoice is written off as bad debt, a separate record must also be kept for 4 years. The debt will have to be older than 6 months and you must show:

  • Total amount of VAT involved

  • Amount written off/payments received

  • VAT you are claiming on the debt

  • VAT period(s) you paid the VAT and claimed the relief

  • Invoices details (incl. date, customer name)

Errors

Any mistakes made when submitting your VAT return must be reported to HMRC, and shown in the VAT account. This includes: 

  • Date the error is discovered

  • Details regarding the error, how it happened, and how it has been amended.

For any further advice, please do not hesitate to contact us. To stay up-to-date and informed on the latest in UK tax advice, subscribe to our newsletter.

 
alistair bambridgeComment