What records you must keep if you're VAT-registered

HMRC Inspection

‍As a business owner, you should always be ready and expect the tax authorities to occasionally drop by your business for a records review. They’ll let you know which documents they need to see in advance, so have them ready for inspection.

Record Essentials

‍The golden rule is simple: maintain standard business records. The format is flexible, and most bookkeeping or digital systems will suffice. Just remember, any records that are part of your ‘electronic account’ need to be stored digitally in compatible software.

Record Requirements

‍Ensure your records are:

· Complete.

· Current.

· Accurate enough to determine the correct VAT payable or reclaimable.

VAT-Specific Records

‍There are two must-haves for VAT:

· VAT Account: Often based on regular business records, this details the VAT you owe or can claim. Digital record keepers, this is your electronic account.

· VAT Invoice: Necessary for transactions with other VAT-registered businesses, a VAT invoice includes specific details as dictated by VAT regulations. Most standard invoices already cover this.

Broad Spectrum of Business Records

‍VAT regulations mandate the retention of a wide array of business records, including but not limited to:

· Annual financial statements.

· Banking records.

· Accounting books.

· Notes on credits or debits.

· Documentation of goods moving to or from the UK or EU.

· Certificates for special VAT treatments.

· Import/export paperwork.

· Transaction records like orders and delivery notes.

· Daily sales records and correspondence.

Record Retention

‍Typically, you’re required to keep your business records for VAT for at least six years. If this rule poses significant storage issues or costs, you can try reaching out to HMRC’s VAT general enquiries for potential exceptions.

VAT Invoices Explained

‍A VAT invoice is simply an invoice that includes certain details for VAT purposes. If you’re VAT-registered, you should issue a VAT invoice for all standard or reduced rate supplies to another VAT-registered entity within 30 days of the transaction.

The Vital Role of VAT Invoices

‍VAT invoices aren’t just paperwork; they’re the backbone of your VAT claims. Keep every VAT invoice you issue, and store the ones you receive carefully — they’re your ticket to reclaiming VAT.

Why Your Customers Need Them

‍For your clients, a VAT invoice is more than a receipt; it’s proof for reclaiming VAT. It’s essential to their financial health, so handle them with care.

The Digital Edge

‍Switching to electronic invoices isn’t just modern; it’s smart. They streamline your audit trail, make tracking orders a breeze, cut down on paper clutter, and can even boost your cash flow. Plus, they’re secure and simplify resolving any disputes.

Crafting the Perfect VAT Invoice

‍Every VAT invoice should be a clear snapshot of the transaction. Make sure it includes:

·        A unique identifying number.

·        The date and time of supply.

·        Your business details, including VAT registration number.

·        Your customer’s details.

·        A detailed description of goods or services.

·        The quantity, VAT rate, and amount payable for each item.

·        The total amount payable.

·        Any cash discount rate.

·        The total VAT charged, in sterling.

·        The unit price.

Please note, if you’re dealing with margin schemes or reverse charges, there are special invoicing rules to follow.

Retailers’ VAT Invoicing Simplified

‍If you’re in retail, you’re not obligated to issue a VAT invoice for every sale to unregistered businesses — unless they ask for one. For sales under £250, a simple invoice will do. Over £250? Time to issue a full or modified VAT invoice.

Simplified Invoices Beyond Retail

‍Not a retailer but selling something under £250? A simplified invoice is your go-to. If it’s over £250, choose between a full VAT invoice or a modified one, showing VAT-inclusive values.

Knowing When to Issue a VAT Invoice

‍It’s not always necessary to issue a VAT invoice. Here are the exceptions:

·        If your customer uses self-billing or if you provide authenticated receipts.

·        When you’re giving away goods as gifts and VAT applies.

·        If you’re selling goods under a VAT second-hand margin scheme.

·        When your sales are only exempt or zero-rated within the UK.

Handling Cash Payments Post-Invoice

‍After issuing a VAT invoice, if your customer pays in cash, they might want a receipt to comply with cash accounting VAT rules. Be prepared to provide a receipt that details the amount and the date of the payment if they request it.

Simplifying VAT Tax Rules

‍Navigating the twists and turns of the UK VAT tax rules can be quite the challenge. To ensure you’re making all the right moves, consider partnering with a seasoned accountant. They’re the savvy navigators who can steer you through the tax terrain, ensuring you stay on track and meet all your obligations with ease.