VAT RECORDS

A VAT-registered business must keep certain records. Principally, these include invoices, both sent and received, and receipts.

Records
Once VAT-registered, a business must issue a VAT invoice whenever it charges another business customer for its goods or services, whether at the standard or reduced rate.

All invoices and receipts must be retained.

A separate account needs to be kept of all the VAT received for sales and paid on purchases, along with details of the non-VAT amount.

There is no mandatory form in which the records must be kept, but the information must be clear and accessible.

Invoices
All VAT invoices must show the rate at which VAT is charged, the total amount of VAT that has been charged (separately from the gross cost of the item or service, which must also be shown) and the VAT number assigned to the business.

The VAT invoice must be issued no later than 30 days after the supply of the item or service.

As well as the information set out above, the invoice must contain the name and address of the business; a number specific to the invoice; the date when the invoice was raised; the date when the item or service was supplied if this is not the same date on which the invoice was issued; the name of the client or customer; a description of the item or service; the quantity of the items or the range of the service supplied; and any discounts offered.

Businesses that sell direct to the public do not have to produce a VAT invoice except when the customer requests that they do.

Accounts
An effective VAT accounting system will maintain a record of the VAT received on sales (output tax) and the VAT paid on purchases (input tax). At the end of each accounting period, a note must be kept of the sum that results from the deduction of the input tax from the output tax.

Where an error occurs, it can be corrected with a readjusted payment on the next VAT return if the amount is £2,000 or less. If the error is greater than £2,000, then the local VAT office needs to be told of the discrepancy in writing.

Errors can usually be rectified retrospectively for accounting periods within three years.

VAT schemes
Although all VAT schemes require that similar records be maintained, particular accounting schemes have their own specific requirements. Details of these can be found in the articles on the cash accounting scheme, the flat rate scheme and the annual accounting scheme.