You must keep a separate record of the VAT you charge and the VAT you pay on your purchases. This record is called a ‘VAT account’.
You use the figures in your VAT account to complete your VAT Return.
There aren’t any rules on what a VAT account should look like, but it must show:
- your total VAT sales
- your total VAT purchases
- the VAT you owe HM Revenue and Customs (HMRC)
- the VAT you can reclaim from HMRC
- if your business uses the VAT Flat Rate Scheme - the flat rate percentage and turnover it applies to
- the VAT on any EU acquisitions (purchases) or dispatches (sales)
If you’ve made an error in your VAT Return the VAT account must show:
- the date you discovered the error
- details about the error - eg how it happened, how you corrected it
You may also need to report the error to HMRC.
If you write off an invoice as a bad debt, you must keep a separate ‘VAT bad debt account’. The debt must be older than 6 months and for each bad debt you must show:
- total amount of VAT involved
- amount written off and any payments you’ve received
- the VAT you’re claiming on the debt
- the VAT period(s) you paid the VAT and are claiming the relief
- invoices details like date, customer name
You must keep this information for 4 years.