UK VAT Law requires all registered businesses to keep their records for at least six years. If you are a new business owner, here are some tips on how to maintain good VAT records.
According to UK law, all VAT-registered businesses must keep records of their sales and purchases, maintain a summary of their VAT account, and issue proper VAT invoices.
VAT consultancy services in London are available for businesses that want to keep their VAT in check and minimise VAT errors. On your part as an owner of a VAT-registered business, here are some tips that you should keep in mind:
1. Know what records you need to keep
The records you are required to keep depends on the nature of your business. But in general, here are the documents that you need:
- Annual accounts
- Bank statements
- Account books
- Credit or debit receipts
- Purchase and sales invoices
- Daily takings records
- Order and delivery notes
- Import and export documentation
- Special VAT documentation
One of the requirements of HMRC is for businesses to keep a VAT account, which is a record of VAT both charged and paid by the business on all purchases. In your VAT account, you should have:
- Complete VAT sales
- Complete VAT purchases
- VAT owed to HMRC
- Reclaimable VAT from HMRC
- Percentage of flat rate and turnover
- VAT levied on EU sales and purchases, if applicable
- Error date if there is a mistake on the VAT return
- Details of the error and how it was corrected
2. Organise and secure VAT records
You must keep all your records complete, neat, and organised; you don’t want to have HMRC to come around for an inspection with your records a mess. There is no prescribed way of record-keeping for VAT records, but in general, businesses must have a system of organisation. Separate your VAT records according to category and, if necessary, create second copies for security.
3. Retain records for enough time
VAT records must be kept for at least six years unless your business is registered under the VAT MOSS service, in which you must keep records for ten years. VAT records may be kept in paper form or electronically through a book-keeping program. In either case, all records must be accurate and comprehensible.
4. Hire an accountant
VAT requirements may be straightforward, but filing tax returns every year is not that simple. Depending on the VAT scheme you registered for, organising your tax documents can take a lot of time, which not a lot of business owners have. Doing this by yourself can be confusing if you’re not well-versed with numbers. Hence, it is better to hire an accountant if you either don’t have the time or the skill to do it yourself.
5. Don’t forget the other stuff<
Also make sure to keep records of:
- Things that you cannot reclaim on your VAT
- Goods that were taken for private use
- Zero, reduced, or exempted VAT-rated items sold or purchased
- VAT reclaimed on mileage
Keeping correct, updated, and complete VAT records will make sure that you fully comply with your tax obligations, have a record of all the VAT you’ve charged, and have an easy time filing for tax returns. By following the tips mentioned above, you can keep your records straight and avoid penalties.