If you own or run a VAT-registered business you must keep certain records to comply with HMRC requirements and support the information you report on your VAT Returns.
Most VAT-registered businesses are also required to keep their VAT records digitally due to Making Tax Digital (MTD). Failure to keep adequate records may result in penalties and make it more difficult to support VAT claims if HMRC carries out a compliance check.
What sales information do I need to keep?
For VAT purposes, you should keep records of your sales and the VAT, known as output VAT, charged on those sales.
This will normally include:
copies of VAT invoices issued to customers
credit notes and debit notes issued
records of daily takings, where applicable
evidence supporting any zero-rated exports or other special VAT treatment
any other records that support the sales figures included on your VAT Returns.
What purchase and expense information do I need to keep?
If you reclaim VAT on purchases or business expenses, known as input tax, you must keep evidence to support your claim.
This will normally include:
VAT invoices received from suppliers
receipts and other evidence of business expenses
import documentation, such as postponed import VAT statements or C79 certificates, where applicable
credit notes and debit notes received from suppliers
records showing how any business and private use adjustments have been calculated.
To reclaim VAT, you will usually need a valid VAT invoice showing at least:
the supplier’s name
their VAT registration number
the invoice date
a description of the goods or services supplied
the amount charged and the VAT applied.
Checklist: What other documents should I keep?
In addition to your sales, purchase and VAT records, you may need to keep other business records to support your VAT position and accounting records. Depending on your business, these may include the documents listed below.
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Most VAT-registered businesses must keep VAT records digitally using HMRC MTD-compatible accounting software.
Generally, you must ensure that all your records, whether they relate to sales, purchases or expenses, are retained for at least six years and made available if HMRC asks to review them.
Maintaining a VAT account
A VAT account is a record that summarises the output VAT charged on sales and the input VAT reclaimed on purchases and expenses.
MTD-compatible accounting software should automatically maintain a VAT account as part of your business’s records and use it to prepare your VAT Returns, as well as to provide a clear audit trail showing how the figures reported to HMRC have been calculated.
A VAT account will typically include:
Type of entry
Example
Output VAT
VAT charged on sales invoices
Input VAT
VAT incurred on purchases and business expenses
Credit notes
Adjustments for credit notes issued or received
VAT corrections
Corrections relating to previous VAT periods
Bad debt relief
VAT reclaimed on qualifying bad debts
Import VAT
Recoverable VAT on imported goods, where applicable
Other adjustments
Any other VAT adjustments relevant to the business
At the end of each VAT period, the VAT account should show:
Output VAT minus Input VAT equals VAT payable to HMRC (or refundable by HMRC if input VAT exceeds output VAT).
HMRC allows the format of a VAT account to vary depending on the accounting software used, as long as it contains sufficient information to support the figures reported on the VAT Return.
