VAT record keeping

4. VAT account

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)

Errors

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.

Bad debts

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.