VAT registered business must keep certain records, otherwise a financial penalty could be incurred.

What sales information do I need to keep?

The sales information that must be kept for VAT purposes is:

  • Copies of all VAT invoices issued 
  • A VAT account - see What is a VAT account? below for more details.

You must keep VAT records for at least six years. 

Checklist: What other documents do I need to keep?

VAT law requires you to keep business records. The records will vary from business to business, they include the following listed below. Login to save this checklist to your profile for future use - as you work through the list, any checkboxes that are ticked or unticked will be automatically saved to your profile. (To register to join and enjoy the benefits of membership click on the link at the top right of the page. It will only take a few minutes to create your profile).

What is a VAT account?

A VAT account must be maintained by VAT registered businesses. It shows a summary of the totals of your output VAT and input VAT.

The account can be in any form as long as it shows the required information.

Below is an example of a VAT account from the HMRC VAT guide. The account is split into two sides, one representing input VAT and the other output VAT (you may find that some of the lines are irrelevant to your business):

Period: from 1 January to 31 March - This is the VAT period to which your VAT return relates.

VAT deductible - input tax  VAT payable - output tax  
VAT you have been charge on your purchases£ VAT you have been charged on your sales£ 
January2,215.23This is the input VAT that you have claimed from your purchases and other expensesJanuary2,780.23The VAT that has been charged on your sales
February1,626.47 February2,305.81 
March2,792.01 March3,302.45 
 6,633.71  8,388.49 
VAT allowable on acquisitions96.85This relates to purchases which are made from other European Union (EU) member statesVAT due on acquisitions96.85This relates to purchases which are made from other European Union (EU) member states. The figure should be the same as the on entered onto the other side
Net over claim input tax from previous returns-125.50This relates to net errors made in previous VAT periods (it could be on either the input or output VAT side of the accountNet understatement of output tax on previous returns719.26This relates to net errors made in previous VAT periods (it could be on either the input or output VAT side of the account)
Bad debt relief96.48Only include VAT in bad debts if the debt is over six months old (from the date the payment was due) and is less than four years and six months oldAnnual adjustment: Retail Scheme - Apportionment Scheme 191.69This figure would only be shown if you use a retail scheme
Sub-total6701.54 Sub-total9,296.29 
Less:  Less:  
VAT on credits received from suppliers-27.50This figure is the VAT on any credit notes you have receivedVAT on credits allowed to customers-23.00This figure is the VAT on any credit notes you have issued
Total tax deductible6,674.04This is the total of all figures that have been entered on the input VAT side of the VAT accountTotal tax payable9,273.29This is the total of all the figures that have been entered on the output VAT side of the VAT account
   Less total tax deductible6,674.04This is the total of all the figures that have been entered on the input VAT side of the VAT account
   Payable to HMRC2,599.25This is the difference between total tax payable (output VAT) and the total tax deductible (input VAT). If the input VAT exceeds the output VAT, this will be the amount fo the refund payable to you by HMRC

Do I need to use accounting software?

Business records can be kept in any form that you deem to be suitable in operating the business. They may be paper based or computer based, you do not need to use accounting software.

However, record keeping could be simplified by moving from a manual to a computerised system. However, lack of training and knowledge can result in errors being made.

Next Steps

Read more on VAT invoices

If your business is VAT registered, then whenever you supply taxable (standard or reduced rated) goods or services to another VAT registered business you must provide a VAT invoice. A VAT registered customer needs a valid VAT invoice from their supplier in order to claim back the VAT on the goods or services which have been purchased.

Read more

How do I complete my VAT Return?

All VAT registered businesses must complete and submit VAT returns to Her Majesty’s Revenue and Customs (HMRC). Read more on completing your VAT return here. 

Read more

Stay informed

Register or Login to add this article to your reading list.

Share this