Guidance

Record keeping for VAT (Notice 700/21)

Find out what records you must keep and how to keep them if you're registered for VAT.

Detail

This notice cancels and replaces Notice 700/21 (December 2007).

1. Overview

1.1 This notice

This notice gives guidance on the records you must keep if you’re registered for VAT. It also tells you how best to keep these records.

Further information is also available in VAT guide (Notice 700).

1.2 Changes to this notice

The changes to this notice are to:

  • correct out of date information
  • correct an error in paragraph 3.3
  • introduce new guidance on issuing VAT simplified invoices by businesses other than retailers

1.3 Requirements for other taxes

This notice explains the record-keeping rules for VAT. Many records kept for VAT purposes will overlap with records for other taxes, but the detailed rules as well as the retention periods may differ.

1.4 Checking your records

From time to time we’ll visit you, usually at your main place of business. We’ll normally specify which records we want to see ahead of a visit and those records must be available.

You can find further information on general compliance checks in factsheet CC/FS1a.

2. Record-keeping rules for all VAT-registered businesses

2.1 Records you must keep

The basic rule is that you must create and keep normal business records. You do not have to keep records in a set way and most bookkeeping and computer systems will meet this requirement.

Apart from keeping business records and the special requirements, we ask that your records are complete, up to date, and allow you to calculate correctly the amount of VAT that you have to pay or can claim from us.

2.2 Special records for VAT

There are 2 records that are specifically required for VAT. These are:

  • the VAT account, in many cases this will based on a routine business record of VAT you owe or can claim
  • a VAT invoice for supplies to other VAT-registered businesses, a ‘VAT invoice’ is just the term for an invoice which contains some information required by the VAT rules, most commercial invoices will already hold the right information

For more information about the records you need to keep if you supply digital services to consumers elsewhere in the EU, and are registered for the VAT Mini One Stop Shop (VAT MOSS), refer to the guidance.

2.3 Business records

VAT law requires you to keep all your business records. Our view of business records is wide and will include:

  • annual accounts, including profit and loss accounts
  • bank statements and paying-in slips
  • cash books and other account books
  • credit or debit notes you issue or receive
  • documentation relating to dispatches and acquisitions of goods to or from EU member states
  • documents or certificates supporting special VAT treatment such as relief on supplies to visiting forces or zero rating by certificate
  • import and export documents
  • orders and delivery notes
  • purchase and sales books
  • purchase invoices and copy sales invoices
  • records of daily takings such as till rolls
  • relevant business correspondence
  • VAT account

What a business record is will depend on the type of business you run. You’ll always have to keep a VAT account and copies of invoices, but some of the other records may not be a normal record in your business. If that’s the case you do not have to keep such a record just for VAT. But equally, some businesses will create additional business records and these must be kept and produced to HMRC when you’re asked.

2.4 Keeping records

Generally, you must keep all your business records for VAT purposes for at least 6 years. Records that you use for other tax purposes may need to be kept for longer periods.

If the 6-year rule causes you serious storage problems or undue expense, or you need advice on records for other types of tax, then you should consult VAT general enquiries. We may be able to allow you to keep some records for a shorter period.

2.5 Additional records you might have to keep

We may direct some businesses to keep additional records. This is where we have reasonable grounds to believe that such records might help us identifying supplies on which VAT is at particular risk of going unpaid. This will most commonly arise with supplies of mobile phones and computer chips, but is not limited to these types of supplies. Failure to comply with one of these directions can result in a financial penalty.

You have a right of appeal against the issue of a direction and against the imposition of any penalty for non-compliance.

2.6 Keeping records on your computer

It’s common for business records and accounts to be kept on a computer and there are no special VAT rules about using a computer.

2.7 Failing to keep or produce records

There’s a financial penalty for failure to keep or produce the records required by law.

You can request a review of any penalty or appeal to an independent tax tribunal.

2.8 Selling or transferring your business as a going concern

In most circumstances the seller of the business will keep the business records. When this happens, the seller must make available to the buyer any information the buyer needs to comply with their VAT obligations.

Where the buyer takes on the seller’s VAT registration number, the seller must transfer the records to the buyer, unless the seller needs to keep the records. The seller should contact VAT: General Enquiries for permission to keep the records.

If necessary we may disclose to the buyer information we hold on the transferred business. We’ll do this to allow the buyer to meet their legal obligations. But we’ll consult the seller first, to make sure that we don’t disclose confidential information.

Further information can be found in VAT Notice 700/9: transfer of a business as a going concern.

3. VAT account

3.1 Explanation of a VAT account

A VAT account is the link (the audit trail) between your business records and your VAT Return. Every VAT-registered business must keep a VAT account and it will help you to fill in your VAT Return. But there is no set format for a VAT account as long as it contains the information described in this section.

3.2 Keeping a VAT account

You can keep the VAT account in the way that suits your business, as long as it contains the information described below.

To show the link between the output tax in your records and the output tax on the return, you must have a record of:

  • the output tax you owe on sales
  • the output tax you owe on acquisitions from other EU member states
  • the tax you’re required to pay on behalf of your supplier under a reverse charge procedure
  • tax that needs to be paid following a correction or error adjustment
  • any other adjustment required by the VAT rules

To show the link between the input tax in your records and the input tax on your return you must have a record of:

  • the input tax you’re entitled to claim from business purchases
  • the input tax allowable on acquisitions from other EU member states
  • tax that you’re entitled to following a correction or error adjustment
  • any other necessary adjustment

3.3 Example of a VAT account

There’s no set way to keep your VAT account, but you may find the example for a quarterly trader useful. Should you account for VAT monthly or annually, you’ll need to adjust this accordingly.

Period from 1 January to 31 March

Input tax £ Output tax £
VAT you have been charged on your purchases   VAT you have charged on your sales  
January 2,215.23 January 2,780.23
February 1,626.47 February 2,305.81
March 2,792.01 March 3,302.45
Sub-total 6,633.71 Sub-total 8,388.49
Other adjustments (specify)   Other adjustments (specify)  
See paragraph 3.4 for examples   See paragraph 3.4 for examples  
Total tax deductible 6,633.71 Total tax payable 8,388.49
    Payable to HMRC 1,754.78

3.4 Adjusting your VAT account

You may need to make an adjustment to your VAT account if you:

3.5 Filling in your VAT Return

You can use the figures from your VAT account to fill in your VAT Return. You must send us your return and any payment due no later than one month after the end of your accounting period. This is known as the ‘standard’ due date. This is extended to 2 months for businesses on the annual accounting scheme (see VAT Notice 732: annual accounting).

If you have access to a computer, you can register to submit electronic VAT Returns instead of paper returns. If you pay your return electronically, you’ll normally get extra time after the standard due date, for both your return and payment to reach us.

For full details of this method of submitting your return, see VAT Notice 700/12: how to fill in and submit your VAT Return.

4. VAT invoices - the basics

4.1 Explanation of a VAT invoice

A VAT invoice is just the term for an invoice which contains some information required by the VAT rules. Most commercial invoices will already meet the requirements.

Only VAT-registered businesses can issue VAT invoices and if you’re VAT-registered, you must issue a VAT invoice whenever you supply standard rate or reduced rate goods or services to another VAT-registered person. Normally you must issue a VAT invoice within 30 days of the date you make the supply.

4.2 Importance of VAT invoices

The VAT invoices you issue form a very important part of your business records and you must keep a copy of every VAT invoice you issue.

Similarly the VAT invoices you receive are the primary evidence for you to recover VAT you have incurred as input tax and you should make sure you keep them in a way that allows you to find them easily when asked.

VAT invoices are crucial to your business customers because the VAT invoice is the primary evidence that’ll allow them to recover the VAT you’ve charged.

4.3 Issuing invoices electronically

Electronic invoicing offers many advantages over paper invoicing. Electronic transmission of documents in a secure environment can make sure of:

  • structured data for effective auditing
  • improved traceability of orders
  • reduction in paper documents, which can reduce storage and handling costs
  • quick access and retrieval
  • improved cash flow
  • security and easier dispute handling

See VAT Notice 700/63: electronic invoicing for information on the rules which apply to electronic invoicing.

5. VAT invoices - detailed rules

5.1 Details to include on a VAT invoice

You must show the following details on any VAT invoices you issue:

  • a sequential number based on one or more series which uniquely identifies the document
  • the time of the supply
  • the date of issue of the document (where different to the time of supply)
  • the name, address and VAT registration number of the supplier
  • the name and address of the person to whom the goods or services are supplied
  • a description sufficient to identify the goods or services supplied
  • for each description, the quantity of the goods or the extent of the services, and the rate of VAT and the amount payable, excluding VAT, expressed in any currency
  • the gross total amount payable, excluding VAT, expressed in any currency
  • the rate of any cash discount offered
  • the total amount of VAT chargeable, expressed in sterling
  • the unit price
  • the reason for any zero rate of exemption

Special rules apply to invoices issued under a margin scheme or subject to a reverse charge. You need to follow the rules for such supplies.

5.2 Invoices to other EU member states

If you send an invoice to a person in another EU member state you must also show:

  • the letters ‘GB’ in front of your registration number for cross border supplies
  • the registration number of the recipient of the supply preceded by the alphabetical code of the relevant EU member state
  • a reference to any new means of transport

5.3 Example of a VAT invoice

A tax invoice

Sales invoice no 174

From: Foundation Trading (UK) Ltd VAT reg No 987 6543 21 Bowan Street, Chester

To: AN Other LTD57 North Road, London N12 5NA

Sale: Time of supply 30/10/07

Date of issue: 01/11/07

Quantity Description and price Amount exclusive of VAT VAT rate VAT net
6 Radios, SW15 @ £25.20 151.20 20 30.24
4 DVD layers @ £23.60 94.40 20 18.88
    245.60   49.12
  VAT 49.12    
  Total 294.72    

5.4 VAT invoices issued by retailers

There’s no requirement to issue a VAT invoice for retail supplies to unregistered businesses. As a retailer, you may assume that no VAT invoice is required unless your customer asks for one. If you’re asked for an invoice then you have the following options.

If the charge you make for the individual supply is:

  • £250 or less (including VAT), then you can issue an invoice showing your name, address and VAT registration number, the time of supply (tax point), a description which identifies the goods or services supplied, and for each VAT rate applicable, the total amount payable, including VAT shown in sterling and the VAT rate charged - exempt supplies must not be included in this type of VAT invoice
  • more than £250 and you’re asked for a VAT invoice, then you must issue either a full VAT invoice or modified VAT invoice, showing VAT inclusive rather than VAT exclusive values

5.5 VAT simplified invoices issued by businesses other than retailers

If you’re not a retailer and the total value of your supply does not exceed £250 you may issue your customer with a simplified invoice. If you’re asked for an invoice then you have the following options.

If the charge you make for the individual supply is:

  • £250 or less (including VAT), then you issue an invoice showing your name, address and VAT registration number the time of supply (tax point), a description which identifies the goods or services supplied, and for each VAT rate applicable, the total amount payable, including VAT shown in sterling and the VAT rate charged - exempt supplies must not be included in this type of VAT invoice
  • more than £250, then you must issue either a full VAT invoice or a modified VAT invoice, showing VAT inclusive rather than VAT exclusive values

5.6 When to issue an invoice

You do not always have to issue a VAT invoice to a registered person if:

5.7 Payment in cash when a VAT invoice has been issued

Your customer may need a receipt for the cash payment under the VAT rules that allow cash accounting rather than invoice accounting. If asked, you must give your customer a receipt for the amount and date it.

Your rights and obligations

Read Your Charter to find out what you can expect from HMRC and what we expect from you.

Help us improve this notice

If you have any feedback about this notice email: customerexperience.indirecttaxes@hmrc.gsi.gov.uk.

You’ll need to include the full title of this notice. Do not include any personal or financial information like your VAT number.

If you need general help with this notice or have another VAT question you should phone our VAT helpline or make a VAT enquiry online.

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Published 26 September 2013