I own and manage a chain of garages, offering both fuel and car maintenance and repair services. We have been VAT registered for just over four years, and have now signed up for Making Tax Digital. We are in the process of making the necessary adjustments to our VAT record keeping. How do we go about linking our accounts software to the HMRC system, so that our digital records can be uploaded?

If you use more than one software package to keep records and submit returns, you need to link them.

VAT record keeping

Overview

VAT-registered businesses must:

keep records of sales and purchases

keep a separate summary of VAT called a VAT account

issue correct VAT invoices

This guide is also available in Welsh (Cymraeg).

VAT registered businesses with a taxable turnover of more than £85,000 must follow the rules for ‘Making Tax Digital for VAT’.

If you’ve signed up for Making Tax Digital for VAT, the records you need to keep are the same as any VAT-registered business but you’ll need to keep some of them digitally.

How to keep VAT records

You must keep VAT records for at least 6 years (or 10 years if you used the VAT MOSS service).

You can keep VAT records on paper, electronically or as part of a software program (such as book-keeping software). Records must be accurate, complete and readable.

If your taxable turnover is more than £85,000, you must keep a digital record of anything that’s needed for your VAT Return.

If you’ve lost a VAT invoice or it is damaged and no longer readable, ask the supplier for a duplicate (marked ‘duplicate’).

HMRC can visit your business to inspect your record keeping and charge you a penalty if your records are not in order.

You can hire a professional (such as an accountant) if you need help with your VAT.

VAT invoices

Only VAT-registered businesses can issue VAT invoices and you must:

issue and keep valid invoices - these can be paper or electronic

keep copies of all the sales invoices you issue even if you cancel them or produce one by mistake

keep all purchase invoices for items you buy

Valid invoices

You’ll use a full VAT invoice for most transactions. You can use:

a modified invoice for retail supplies over £250

a simplified invoice for retail supplies under £250 - and for other supplies from 1 January 2013

You cannot reclaim VAT using an invalid invoice, pro-forma invoice, statement or delivery note.

Include the following on your invoice, depending on which type you use.

Invoice information | Full invoice | Simplified invoice | Modified invoice

Unique invoice number that follows on from the last invoice | Yes | Yes | Yes

Your business name and address | Yes | Yes | Yes

Your VAT number | Yes | Yes | Yes

Date | Yes | No | Yes

The tax point (or ‘time of supply’) if this is different from the invoice date | Yes | Yes | Yes

Customer’s name or trading name, and address | Yes | No | Yes

Description of the goods or services | Yes | Yes | Yes

Total amount excluding VAT | Yes | No | Yes

Total amount of VAT | Yes | No | Yes

Price per item, excluding VAT | Yes | No | Yes

Quantity of each type of item | Yes | No | Yes

Rate of any discount per item | Yes | No | Yes

Rate of VAT charged per item - if an item is exempt or zero-rated make clear no VAT on these items | Yes | Yes (1) | Yes

Total amount including VAT | No | Yes (1) | Yes

(1) If items are charged at different VAT rates, then show this for each.

Accounting schemes

If you use the Cash Accounting Scheme you have to stamp an invoice with the amount of cash paid and the date.

There are different rules for record keeping and invoicing if you use a VAT Margin Scheme.

Deadlines

Usually VAT invoices must be issued within 30 days of the date of supply or the date of payment (if you’re paid in advance).

International trade

You do not have to show all amounts on your invoices in sterling. If you issue VAT invoices in a foreign currency or language, you must:

show the total VAT payable in sterling on your VAT invoice if the supply takes place in the UK

be able to provide an English translation of any invoice within 30 days if asked to do so by a visiting VAT officer

Converting to sterling

To convert to sterling you can:

use the market selling rate at the time of supply

use the European Central Bank’s rate

use HMRC’s period rates of exchange - the rates usually stay the same for each calendar month

apply to HMRC to use a different method to account for the VAT

There are different rules if you use the Tour Operator’s Scheme.

Exceptions

You do not need to issue a VAT invoice if:

your invoice is only for exempt or zero-rated sales within the UK

you’re giving goods as a gift

you sell goods under a VAT second-hand margin scheme

your customer operates a self-billing arrangement

VAT records

Records you must keep include:

copies of all invoices you issue

all invoices you receive (originals or electronic copies)

self-billing agreements - this is where the customer prepares the invoice

name, address and VAT number of any self-billing suppliers

debit or credit notes

import and export records

records of items you cannot reclaim VAT on - for example business entertainment

records of any goods you give away or take from stock for your private use

records of all the zero-rated, reduced or VAT exempt items you buy or sell

a VAT account

You must also keep general business records such as bank statements, cash books, cheque stubs, paying-in slips and till rolls.

If you use the Cash Accounting Scheme you must use these records to match them against your payment records and receipts.

If you supply digital services in the EU and use VAT MOSS, you must keep additional records.

HM Revenue and Customs (HMRC) may check your records to make sure you’re paying the right amount of tax.

Keeping digital records

VAT registered businesses with a taxable turnover of more than £85,000 must follow the rules for ‘Making Tax Digital for VAT’.

Retailers

If you’re a retailer you do not have to issue VAT invoices unless a customer asks for one. Keep a copy if you do. Retailers can issue ‘simplified invoices’ for supplies under £250.

Debit and credit notes

When you return goods to a supplier or a customer returns goods to you, the balance of payment can be settled with a credit or debit note.

Record these in your accounts and keep any original notes.

VAT records for Making Tax Digital

VAT registered businesses with a taxable turnover of more than £85,000 must follow the rules for ‘Making Tax Digital for VAT’ by keeping some records digitally, unless:

your business uses the VAT GIANT service, for example if you’re a government department or an NHS Trust

you apply for an exemption

You can choose to sign up to Making Tax Digital for VAT if your business earns less than £85,000.

From 1 April 2022 all VAT registered businesses must sign up, whatever they earn.

Records you must keep digitally

You need to keep the following records digitally:

your business name, address and VAT registration number

any VAT accounting schemes you use

the VAT on goods and services you supply, for example everything you sell, lease, transfer or hire out (supplies made)

the VAT on goods and services you receive, for example everything you buy, lease, rent or hire (supplies received)

any adjustments you make to a return

the ‘time of supply’ and ‘value of supply’ (value excluding VAT) for everything you buy and sell

the rate of VAT charged on goods and services you supply

reverse charge transactions - where you record the VAT on both the sale price and the purchase price of goods and services you buy

your total daily gross takings if you use a retail scheme

items you can reclaim VAT on if you use the Flat Rate Scheme

your total sales, and the VAT on those sales, if you trade in gold and use the Gold Accounting Scheme

You also need to keep digital copies of documents that cover multiple transactions made on behalf of your business by:

volunteers for charity fundraising

a third party business

employees for expenses in petty cash

You must add all your transactions to your digital records, but you do not need to scan paper records like invoices or receipts.

How to keep digital records

You need to use a compatible software package or other software (like spreadsheets) that connect to HMRC systems.

If you use more than one software package to keep records and submit returns, you need to link them.

Some ways you can link your software include:

using formulas to link cells in spreadsheets

emailing records

putting records on a portable device to give to your agent

importing and exporting XML and CSV files

downloading and uploading files

You must have links between the software you use by your first VAT period after 1 April 2021.

When to send your VAT return

The deadlines for sending your VAT returns will not change after you sign up for Making Tax Digital for VAT.

To see when your next return is due, sign in to your VAT online account.

How to sign up for Making Tax Digital for VAT

How you sign up depends on whether you’re:

a business

an agent acting for a client

Sign up for Making Tax Digital for VAT

You must sign up for ‘Making Tax Digital for VAT’ if your taxable turnover is more than £85,000, so you can:

keep digital records

submit your business’s VAT return using compatible software

There’s a different way to sign up if you’re an agent.

Before you start

You must have compatible software before you sign up.

What you need

To sign up you need:

your business email address

a Government Gateway user ID and password - if you do not have a user ID, you can create one when you use the service

your VAT registration number and latest VAT return

You’ll also need:

your National Insurance number if you’re a sole trader

your company registration number and Unique Taxpayer Reference if you’re a limited company or registered society

your Unique Taxpayer Reference and the postcode where you’re registered for Self Assessment if you’re a general partnership

your Unique Taxpayer Reference, the postcode where you’re registered for Self Assessment and your company’s registration number if you’re a limited partnership

When to sign up

If you already pay by Direct Debit do not sign up too close to the date your return is due, or you may pay twice.

To avoid this, do not sign up less than:

7 days before your return is due

5 days after your return is due

If you do not pay by Direct Debit, sign up at least 3 days before your return is due.

If you’re finding it difficult to access the service, check if there’s a technical issue or other known problem.

Sign up now

After you’ve signed up

You should get a confirmation email from noreply@tax.service.gov.uk within 3 days of signing up. It might go to your spam folder.

Do not submit a VAT Return until you get a confirmation email.

Contact HMRC if you do not get an email.

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 are no 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

If you are registered for VAT in Northern Ireland, you must also show the VAT on any EU purchases or 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 - for example 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.

Time of supply or tax point

The tax point (or ‘time of supply’) for a transaction is the date the transaction takes place for VAT purposes.

You need to know this because, for example:

it’s included on VAT invoices

it tells you which VAT period the transaction belongs to

it tells you which VAT Return to put the transaction on

The tax point can vary, but is usually the following.

Situation | Tax point

No invoice needed | Date of supply

VAT invoice issued | Date of invoice

VAT invoice issued 15 days or more after the date of supply | Date the supply took place

Payment or invoice issued in advance of supply | Date of payment or invoice (whichever is earlier)

Payment in advance of supply and no VAT invoice yet issued | Date payment received

The date of supply is:

for goods - the date they’re sent, collected or made available (for example installed in the customer’s house)

for services - the date the work is finished

Exceptions

If you use the VAT Cash Accounting Scheme, the tax point is always the date the payment is received.

There are different tax point rules for:

certain trades - like barristers, building and construction

where the supply is not a ‘sale’ – for example business items taken for personal use

Sometimes, one sale can give rise to 2 or more tax points - for example where the customer pays a deposit in advance, and then a final payment.

Some ways you can link your software include:

VAT record keeping

Overview

VAT-registered businesses must:

keep records of sales and purchases

keep a separate summary of VAT called a VAT account

issue correct VAT invoices

This guide is also available in Welsh (Cymraeg).

VAT registered businesses with a taxable turnover of more than £85,000 must follow the rules for ‘Making Tax Digital for VAT’.

How to keep VAT records

You must keep VAT records for at least 6 years (or 10 years if you used the VAT MOSS service).

If your taxable turnover is more than £85,000, you must keep a digital record of anything that’s needed for your VAT Return.

If you’ve lost a VAT invoice or it is damaged and no longer readable, ask the supplier for a duplicate (marked ‘duplicate’).

HMRC can visit your business to inspect your record keeping and charge you a penalty if your records are not in order.

You can hire a professional (such as an accountant) if you need help with your VAT.

VAT invoices

Only VAT-registered businesses can issue VAT invoices and you must:

issue and keep valid invoices - these can be paper or electronic

keep copies of all the sales invoices you issue even if you cancel them or produce one by mistake

keep all purchase invoices for items you buy

Valid invoices

You’ll use a full VAT invoice for most transactions. You can use:

a modified invoice for retail supplies over £250

a simplified invoice for retail supplies under £250 - and for other supplies from 1 January 2013

You cannot reclaim VAT using an invalid invoice, pro-forma invoice, statement or delivery note.

Include the following on your invoice, depending on which type you use.

Invoice information | Full invoice | Simplified invoice | Modified invoice

Unique invoice number that follows on from the last invoice | Yes | Yes | Yes

Your business name and address | Yes | Yes | Yes

Your VAT number | Yes | Yes | Yes

Date | Yes | No | Yes

The tax point (or ‘time of supply’) if this is different from the invoice date | Yes | Yes | Yes

Customer’s name or trading name, and address | Yes | No | Yes

Description of the goods or services | Yes | Yes | Yes

Total amount excluding VAT | Yes | No | Yes

Total amount of VAT | Yes | No | Yes

Price per item, excluding VAT | Yes | No | Yes

Quantity of each type of item | Yes | No | Yes

Rate of any discount per item | Yes | No | Yes

Rate of VAT charged per item - if an item is exempt or zero-rated make clear no VAT on these items | Yes | Yes (1) | Yes

Total amount including VAT | No | Yes (1) | Yes

(1) If items are charged at different VAT rates, then show this for each.

Accounting schemes

If you use the Cash Accounting Scheme you have to stamp an invoice with the amount of cash paid and the date.

There are different rules for record keeping and invoicing if you use a VAT Margin Scheme.

Deadlines

Usually VAT invoices must be issued within 30 days of the date of supply or the date of payment (if you’re paid in advance).

International trade

show the total VAT payable in sterling on your VAT invoice if the supply takes place in the UK

be able to provide an English translation of any invoice within 30 days if asked to do so by a visiting VAT officer

Converting to sterling

To convert to sterling you can:

use the market selling rate at the time of supply

use the European Central Bank’s rate

use HMRC’s period rates of exchange - the rates usually stay the same for each calendar month

apply to HMRC to use a different method to account for the VAT

There are different rules if you use the Tour Operator’s Scheme.

Exceptions

You do not need to issue a VAT invoice if:

your invoice is only for exempt or zero-rated sales within the UK

you’re giving goods as a gift

you sell goods under a VAT second-hand margin scheme

your customer operates a self-billing arrangement

VAT records

Records you must keep include:

copies of all invoices you issue

all invoices you receive (originals or electronic copies)

self-billing agreements - this is where the customer prepares the invoice

name, address and VAT number of any self-billing suppliers

debit or credit notes

import and export records

records of items you cannot reclaim VAT on - for example business entertainment

records of any goods you give away or take from stock for your private use

records of all the zero-rated, reduced or VAT exempt items you buy or sell

a VAT account

You must also keep general business records such as bank statements, cash books, cheque stubs, paying-in slips and till rolls.

If you use the Cash Accounting Scheme you must use these records to match them against your payment records and receipts.

If you supply digital services in the EU and use VAT MOSS, you must keep additional records.

HM Revenue and Customs (HMRC) may check your records to make sure you’re paying the right amount of tax.

Keeping digital records

VAT registered businesses with a taxable turnover of more than £85,000 must follow the rules for ‘Making Tax Digital for VAT’.

Retailers

Debit and credit notes

Record these in your accounts and keep any original notes.

VAT records for Making Tax Digital

your business uses the VAT GIANT service, for example if you’re a government department or an NHS Trust

you apply for an exemption

You can choose to sign up to Making Tax Digital for VAT if your business earns less than £85,000.

From 1 April 2022 all VAT registered businesses must sign up, whatever they earn.

Records you must keep digitally

You need to keep the following records digitally:

your business name, address and VAT registration number

any VAT accounting schemes you use

the VAT on goods and services you supply, for example everything you sell, lease, transfer or hire out (supplies made)

the VAT on goods and services you receive, for example everything you buy, lease, rent or hire (supplies received)

any adjustments you make to a return

the ‘time of supply’ and ‘value of supply’ (value excluding VAT) for everything you buy and sell

the rate of VAT charged on goods and services you supply

reverse charge transactions - where you record the VAT on both the sale price and the purchase price of goods and services you buy

your total daily gross takings if you use a retail scheme

items you can reclaim VAT on if you use the Flat Rate Scheme

your total sales, and the VAT on those sales, if you trade in gold and use the Gold Accounting Scheme

You also need to keep digital copies of documents that cover multiple transactions made on behalf of your business by:

volunteers for charity fundraising

a third party business

employees for expenses in petty cash

You must add all your transactions to your digital records, but you do not need to scan paper records like invoices or receipts.

How to keep digital records

You need to use a compatible software package or other software (like spreadsheets) that connect to HMRC systems.

If you use more than one software package to keep records and submit returns, you need to link them.

Some ways you can link your software include:

using formulas to link cells in spreadsheets

emailing records

putting records on a portable device to give to your agent

importing and exporting XML and CSV files

downloading and uploading files

You must have links between the software you use by your first VAT period after 1 April 2021.

When to send your VAT return

The deadlines for sending your VAT returns will not change after you sign up for Making Tax Digital for VAT.

To see when your next return is due, sign in to your VAT online account.

How to sign up for Making Tax Digital for VAT

How you sign up depends on whether you’re:

a business

an agent acting for a client

Sign up for Making Tax Digital for VAT

You must sign up for ‘Making Tax Digital for VAT’ if your taxable turnover is more than £85,000, so you can:

keep digital records

submit your business’s VAT return using compatible software

There’s a different way to sign up if you’re an agent.

Before you start

You must have compatible software before you sign up.

What you need

To sign up you need:

your business email address

a Government Gateway user ID and password - if you do not have a user ID, you can create one when you use the service

your VAT registration number and latest VAT return

You’ll also need:

your National Insurance number if you’re a sole trader

your company registration number and Unique Taxpayer Reference if you’re a limited company or registered society

your Unique Taxpayer Reference and the postcode where you’re registered for Self Assessment if you’re a general partnership

When to sign up

If you already pay by Direct Debit do not sign up too close to the date your return is due, or you may pay twice.

To avoid this, do not sign up less than:

7 days before your return is due

5 days after your return is due

If you do not pay by Direct Debit, sign up at least 3 days before your return is due.

If you’re finding it difficult to access the service, check if there’s a technical issue or other known problem.

Sign up now

After you’ve signed up

You should get a confirmation email from noreply@tax.service.gov.uk within 3 days of signing up. It might go to your spam folder.

Do not submit a VAT Return until you get a confirmation email.

Contact HMRC if you do not get an email.

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 are no 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

If you are registered for VAT in Northern Ireland, you must also show the VAT on any EU purchases or 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 - for example how it happened, how you corrected it

You may also need to report the error to HMRC.

Bad debts

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.

Time of supply or tax point

The tax point (or ‘time of supply’) for a transaction is the date the transaction takes place for VAT purposes.

You need to know this because, for example:

it’s included on VAT invoices

it tells you which VAT period the transaction belongs to

it tells you which VAT Return to put the transaction on

The tax point can vary, but is usually the following.

Situation | Tax point

No invoice needed | Date of supply

VAT invoice issued | Date of invoice

VAT invoice issued 15 days or more after the date of supply | Date the supply took place

Payment or invoice issued in advance of supply | Date of payment or invoice (whichever is earlier)

Payment in advance of supply and no VAT invoice yet issued | Date payment received

The date of supply is:

for goods - the date they’re sent, collected or made available (for example installed in the customer’s house)

for services - the date the work is finished

Exceptions

If you use the VAT Cash Accounting Scheme, the tax point is always the date the payment is received.

There are different tax point rules for:

certain trades - like barristers, building and construction

where the supply is not a ‘sale’ – for example business items taken for personal use

using formulas to link cells in spreadsheets

VAT record keeping

Overview

VAT-registered businesses must:

keep records of sales and purchases

keep a separate summary of VAT called a VAT account

issue correct VAT invoices

This guide is also available in Welsh (Cymraeg).

VAT registered businesses with a taxable turnover of more than £85,000 must follow the rules for ‘Making Tax Digital for VAT’.

How to keep VAT records

You must keep VAT records for at least 6 years (or 10 years if you used the VAT MOSS service).

If your taxable turnover is more than £85,000, you must keep a digital record of anything that’s needed for your VAT Return.

If you’ve lost a VAT invoice or it is damaged and no longer readable, ask the supplier for a duplicate (marked ‘duplicate’).

HMRC can visit your business to inspect your record keeping and charge you a penalty if your records are not in order.

You can hire a professional (such as an accountant) if you need help with your VAT.

VAT invoices

Only VAT-registered businesses can issue VAT invoices and you must:

issue and keep valid invoices - these can be paper or electronic

keep copies of all the sales invoices you issue even if you cancel them or produce one by mistake

keep all purchase invoices for items you buy

Valid invoices

You’ll use a full VAT invoice for most transactions. You can use:

a modified invoice for retail supplies over £250

a simplified invoice for retail supplies under £250 - and for other supplies from 1 January 2013

You cannot reclaim VAT using an invalid invoice, pro-forma invoice, statement or delivery note.

Include the following on your invoice, depending on which type you use.

Invoice information | Full invoice | Simplified invoice | Modified invoice

Unique invoice number that follows on from the last invoice | Yes | Yes | Yes

Your business name and address | Yes | Yes | Yes

Your VAT number | Yes | Yes | Yes

Date | Yes | No | Yes

The tax point (or ‘time of supply’) if this is different from the invoice date | Yes | Yes | Yes

Customer’s name or trading name, and address | Yes | No | Yes

Description of the goods or services | Yes | Yes | Yes

Total amount excluding VAT | Yes | No | Yes

Total amount of VAT | Yes | No | Yes

Price per item, excluding VAT | Yes | No | Yes

Quantity of each type of item | Yes | No | Yes

Rate of any discount per item | Yes | No | Yes

Rate of VAT charged per item - if an item is exempt or zero-rated make clear no VAT on these items | Yes | Yes (1) | Yes

Total amount including VAT | No | Yes (1) | Yes

(1) If items are charged at different VAT rates, then show this for each.

Accounting schemes

If you use the Cash Accounting Scheme you have to stamp an invoice with the amount of cash paid and the date.

There are different rules for record keeping and invoicing if you use a VAT Margin Scheme.

Deadlines

Usually VAT invoices must be issued within 30 days of the date of supply or the date of payment (if you’re paid in advance).

International trade

show the total VAT payable in sterling on your VAT invoice if the supply takes place in the UK

be able to provide an English translation of any invoice within 30 days if asked to do so by a visiting VAT officer

Converting to sterling

To convert to sterling you can:

use the market selling rate at the time of supply

use the European Central Bank’s rate

use HMRC’s period rates of exchange - the rates usually stay the same for each calendar month

apply to HMRC to use a different method to account for the VAT

There are different rules if you use the Tour Operator’s Scheme.

Exceptions

You do not need to issue a VAT invoice if:

your invoice is only for exempt or zero-rated sales within the UK

you’re giving goods as a gift

you sell goods under a VAT second-hand margin scheme

your customer operates a self-billing arrangement

VAT records

Records you must keep include:

copies of all invoices you issue

all invoices you receive (originals or electronic copies)

self-billing agreements - this is where the customer prepares the invoice

name, address and VAT number of any self-billing suppliers

debit or credit notes

import and export records

records of items you cannot reclaim VAT on - for example business entertainment

records of any goods you give away or take from stock for your private use

records of all the zero-rated, reduced or VAT exempt items you buy or sell

a VAT account

You must also keep general business records such as bank statements, cash books, cheque stubs, paying-in slips and till rolls.

If you use the Cash Accounting Scheme you must use these records to match them against your payment records and receipts.

If you supply digital services in the EU and use VAT MOSS, you must keep additional records.

HM Revenue and Customs (HMRC) may check your records to make sure you’re paying the right amount of tax.

Keeping digital records

VAT registered businesses with a taxable turnover of more than £85,000 must follow the rules for ‘Making Tax Digital for VAT’.

Retailers

Debit and credit notes

Record these in your accounts and keep any original notes.

VAT records for Making Tax Digital

your business uses the VAT GIANT service, for example if you’re a government department or an NHS Trust

you apply for an exemption

You can choose to sign up to Making Tax Digital for VAT if your business earns less than £85,000.

From 1 April 2022 all VAT registered businesses must sign up, whatever they earn.

Records you must keep digitally

You need to keep the following records digitally:

your business name, address and VAT registration number

any VAT accounting schemes you use

the VAT on goods and services you supply, for example everything you sell, lease, transfer or hire out (supplies made)

the VAT on goods and services you receive, for example everything you buy, lease, rent or hire (supplies received)

any adjustments you make to a return

the ‘time of supply’ and ‘value of supply’ (value excluding VAT) for everything you buy and sell

the rate of VAT charged on goods and services you supply

reverse charge transactions - where you record the VAT on both the sale price and the purchase price of goods and services you buy

your total daily gross takings if you use a retail scheme

items you can reclaim VAT on if you use the Flat Rate Scheme

your total sales, and the VAT on those sales, if you trade in gold and use the Gold Accounting Scheme

You also need to keep digital copies of documents that cover multiple transactions made on behalf of your business by:

volunteers for charity fundraising

a third party business

employees for expenses in petty cash

You must add all your transactions to your digital records, but you do not need to scan paper records like invoices or receipts.

How to keep digital records

You need to use a compatible software package or other software (like spreadsheets) that connect to HMRC systems.

If you use more than one software package to keep records and submit returns, you need to link them.

Some ways you can link your software include:

using formulas to link cells in spreadsheets

emailing records

putting records on a portable device to give to your agent

importing and exporting XML and CSV files

downloading and uploading files

You must have links between the software you use by your first VAT period after 1 April 2021.

When to send your VAT return

The deadlines for sending your VAT returns will not change after you sign up for Making Tax Digital for VAT.

To see when your next return is due, sign in to your VAT online account.

How to sign up for Making Tax Digital for VAT

How you sign up depends on whether you’re:

a business

an agent acting for a client

Sign up for Making Tax Digital for VAT

You must sign up for ‘Making Tax Digital for VAT’ if your taxable turnover is more than £85,000, so you can:

keep digital records

submit your business’s VAT return using compatible software

There’s a different way to sign up if you’re an agent.

Before you start

You must have compatible software before you sign up.

What you need

To sign up you need:

your business email address

a Government Gateway user ID and password - if you do not have a user ID, you can create one when you use the service

your VAT registration number and latest VAT return

You’ll also need:

your National Insurance number if you’re a sole trader

your company registration number and Unique Taxpayer Reference if you’re a limited company or registered society

your Unique Taxpayer Reference and the postcode where you’re registered for Self Assessment if you’re a general partnership

When to sign up

If you already pay by Direct Debit do not sign up too close to the date your return is due, or you may pay twice.

To avoid this, do not sign up less than:

7 days before your return is due

5 days after your return is due

If you do not pay by Direct Debit, sign up at least 3 days before your return is due.

If you’re finding it difficult to access the service, check if there’s a technical issue or other known problem.

Sign up now

After you’ve signed up

You should get a confirmation email from noreply@tax.service.gov.uk within 3 days of signing up. It might go to your spam folder.

Do not submit a VAT Return until you get a confirmation email.

Contact HMRC if you do not get an email.

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 are no 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

If you are registered for VAT in Northern Ireland, you must also show the VAT on any EU purchases or 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 - for example how it happened, how you corrected it

You may also need to report the error to HMRC.

Bad debts

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.

Time of supply or tax point

The tax point (or ‘time of supply’) for a transaction is the date the transaction takes place for VAT purposes.

You need to know this because, for example:

it’s included on VAT invoices

it tells you which VAT period the transaction belongs to

it tells you which VAT Return to put the transaction on

The tax point can vary, but is usually the following.

Situation | Tax point

No invoice needed | Date of supply

VAT invoice issued | Date of invoice

VAT invoice issued 15 days or more after the date of supply | Date the supply took place

Payment or invoice issued in advance of supply | Date of payment or invoice (whichever is earlier)

Payment in advance of supply and no VAT invoice yet issued | Date payment received

The date of supply is:

for goods - the date they’re sent, collected or made available (for example installed in the customer’s house)

for services - the date the work is finished

Exceptions

If you use the VAT Cash Accounting Scheme, the tax point is always the date the payment is received.

There are different tax point rules for:

certain trades - like barristers, building and construction

where the supply is not a ‘sale’ – for example business items taken for personal use

emailing records

VAT record keeping

Overview

VAT-registered businesses must:

keep records of sales and purchases

keep a separate summary of VAT called a VAT account

issue correct VAT invoices

This guide is also available in Welsh (Cymraeg).

VAT registered businesses with a taxable turnover of more than £85,000 must follow the rules for ‘Making Tax Digital for VAT’.

How to keep VAT records

You must keep VAT records for at least 6 years (or 10 years if you used the VAT MOSS service).

If your taxable turnover is more than £85,000, you must keep a digital record of anything that’s needed for your VAT Return.

If you’ve lost a VAT invoice or it is damaged and no longer readable, ask the supplier for a duplicate (marked ‘duplicate’).

HMRC can visit your business to inspect your record keeping and charge you a penalty if your records are not in order.

You can hire a professional (such as an accountant) if you need help with your VAT.

VAT invoices

Only VAT-registered businesses can issue VAT invoices and you must:

issue and keep valid invoices - these can be paper or electronic

keep copies of all the sales invoices you issue even if you cancel them or produce one by mistake

keep all purchase invoices for items you buy

Valid invoices

You’ll use a full VAT invoice for most transactions. You can use:

a modified invoice for retail supplies over £250

a simplified invoice for retail supplies under £250 - and for other supplies from 1 January 2013

You cannot reclaim VAT using an invalid invoice, pro-forma invoice, statement or delivery note.

Include the following on your invoice, depending on which type you use.

Invoice information | Full invoice | Simplified invoice | Modified invoice

Unique invoice number that follows on from the last invoice | Yes | Yes | Yes

Your business name and address | Yes | Yes | Yes

Your VAT number | Yes | Yes | Yes

Date | Yes | No | Yes

The tax point (or ‘time of supply’) if this is different from the invoice date | Yes | Yes | Yes

Customer’s name or trading name, and address | Yes | No | Yes

Description of the goods or services | Yes | Yes | Yes

Total amount excluding VAT | Yes | No | Yes

Total amount of VAT | Yes | No | Yes

Price per item, excluding VAT | Yes | No | Yes

Quantity of each type of item | Yes | No | Yes

Rate of any discount per item | Yes | No | Yes

Rate of VAT charged per item - if an item is exempt or zero-rated make clear no VAT on these items | Yes | Yes (1) | Yes

Total amount including VAT | No | Yes (1) | Yes

(1) If items are charged at different VAT rates, then show this for each.

Accounting schemes

If you use the Cash Accounting Scheme you have to stamp an invoice with the amount of cash paid and the date.

There are different rules for record keeping and invoicing if you use a VAT Margin Scheme.

Deadlines

Usually VAT invoices must be issued within 30 days of the date of supply or the date of payment (if you’re paid in advance).

International trade

show the total VAT payable in sterling on your VAT invoice if the supply takes place in the UK

be able to provide an English translation of any invoice within 30 days if asked to do so by a visiting VAT officer

Converting to sterling

To convert to sterling you can:

use the market selling rate at the time of supply

use the European Central Bank’s rate

use HMRC’s period rates of exchange - the rates usually stay the same for each calendar month

apply to HMRC to use a different method to account for the VAT

There are different rules if you use the Tour Operator’s Scheme.

Exceptions

You do not need to issue a VAT invoice if:

your invoice is only for exempt or zero-rated sales within the UK

you’re giving goods as a gift

you sell goods under a VAT second-hand margin scheme

your customer operates a self-billing arrangement

VAT records

Records you must keep include:

copies of all invoices you issue

all invoices you receive (originals or electronic copies)

self-billing agreements - this is where the customer prepares the invoice

name, address and VAT number of any self-billing suppliers

debit or credit notes

import and export records

records of items you cannot reclaim VAT on - for example business entertainment

records of any goods you give away or take from stock for your private use

records of all the zero-rated, reduced or VAT exempt items you buy or sell

a VAT account

You must also keep general business records such as bank statements, cash books, cheque stubs, paying-in slips and till rolls.

If you use the Cash Accounting Scheme you must use these records to match them against your payment records and receipts.

If you supply digital services in the EU and use VAT MOSS, you must keep additional records.

HM Revenue and Customs (HMRC) may check your records to make sure you’re paying the right amount of tax.

Keeping digital records

VAT registered businesses with a taxable turnover of more than £85,000 must follow the rules for ‘Making Tax Digital for VAT’.

Retailers

Debit and credit notes

Record these in your accounts and keep any original notes.

VAT records for Making Tax Digital

your business uses the VAT GIANT service, for example if you’re a government department or an NHS Trust

you apply for an exemption

You can choose to sign up to Making Tax Digital for VAT if your business earns less than £85,000.

From 1 April 2022 all VAT registered businesses must sign up, whatever they earn.

Records you must keep digitally

You need to keep the following records digitally:

your business name, address and VAT registration number

any VAT accounting schemes you use

the VAT on goods and services you supply, for example everything you sell, lease, transfer or hire out (supplies made)

the VAT on goods and services you receive, for example everything you buy, lease, rent or hire (supplies received)

any adjustments you make to a return

the ‘time of supply’ and ‘value of supply’ (value excluding VAT) for everything you buy and sell

the rate of VAT charged on goods and services you supply

reverse charge transactions - where you record the VAT on both the sale price and the purchase price of goods and services you buy

your total daily gross takings if you use a retail scheme

items you can reclaim VAT on if you use the Flat Rate Scheme

your total sales, and the VAT on those sales, if you trade in gold and use the Gold Accounting Scheme

You also need to keep digital copies of documents that cover multiple transactions made on behalf of your business by:

volunteers for charity fundraising

a third party business

employees for expenses in petty cash

You must add all your transactions to your digital records, but you do not need to scan paper records like invoices or receipts.

How to keep digital records

You need to use a compatible software package or other software (like spreadsheets) that connect to HMRC systems.

If you use more than one software package to keep records and submit returns, you need to link them.

Some ways you can link your software include:

using formulas to link cells in spreadsheets

emailing records

putting records on a portable device to give to your agent

importing and exporting XML and CSV files

downloading and uploading files

You must have links between the software you use by your first VAT period after 1 April 2021.

When to send your VAT return

The deadlines for sending your VAT returns will not change after you sign up for Making Tax Digital for VAT.

To see when your next return is due, sign in to your VAT online account.

How to sign up for Making Tax Digital for VAT

How you sign up depends on whether you’re:

a business

an agent acting for a client

Sign up for Making Tax Digital for VAT

You must sign up for ‘Making Tax Digital for VAT’ if your taxable turnover is more than £85,000, so you can:

keep digital records

submit your business’s VAT return using compatible software

There’s a different way to sign up if you’re an agent.

Before you start

You must have compatible software before you sign up.

What you need

To sign up you need:

your business email address

a Government Gateway user ID and password - if you do not have a user ID, you can create one when you use the service

your VAT registration number and latest VAT return

You’ll also need:

your National Insurance number if you’re a sole trader

your company registration number and Unique Taxpayer Reference if you’re a limited company or registered society

your Unique Taxpayer Reference and the postcode where you’re registered for Self Assessment if you’re a general partnership

When to sign up

If you already pay by Direct Debit do not sign up too close to the date your return is due, or you may pay twice.

To avoid this, do not sign up less than:

7 days before your return is due

5 days after your return is due

If you do not pay by Direct Debit, sign up at least 3 days before your return is due.

If you’re finding it difficult to access the service, check if there’s a technical issue or other known problem.

Sign up now

After you’ve signed up

You should get a confirmation email from noreply@tax.service.gov.uk within 3 days of signing up. It might go to your spam folder.

Do not submit a VAT Return until you get a confirmation email.

Contact HMRC if you do not get an email.

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 are no 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

If you are registered for VAT in Northern Ireland, you must also show the VAT on any EU purchases or 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 - for example how it happened, how you corrected it

You may also need to report the error to HMRC.

Bad debts

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.

Time of supply or tax point

The tax point (or ‘time of supply’) for a transaction is the date the transaction takes place for VAT purposes.

You need to know this because, for example:

it’s included on VAT invoices

it tells you which VAT period the transaction belongs to

it tells you which VAT Return to put the transaction on

The tax point can vary, but is usually the following.

Situation | Tax point

No invoice needed | Date of supply

VAT invoice issued | Date of invoice

VAT invoice issued 15 days or more after the date of supply | Date the supply took place

Payment or invoice issued in advance of supply | Date of payment or invoice (whichever is earlier)

Payment in advance of supply and no VAT invoice yet issued | Date payment received

The date of supply is:

for goods - the date they’re sent, collected or made available (for example installed in the customer’s house)

for services - the date the work is finished

Exceptions

If you use the VAT Cash Accounting Scheme, the tax point is always the date the payment is received.

There are different tax point rules for:

certain trades - like barristers, building and construction

where the supply is not a ‘sale’ – for example business items taken for personal use

putting records on a portable device to give to your agent

VAT record keeping

Overview

VAT-registered businesses must:

keep records of sales and purchases

keep a separate summary of VAT called a VAT account

issue correct VAT invoices

This guide is also available in Welsh (Cymraeg).

VAT registered businesses with a taxable turnover of more than £85,000 must follow the rules for ‘Making Tax Digital for VAT’.

How to keep VAT records

You must keep VAT records for at least 6 years (or 10 years if you used the VAT MOSS service).

If your taxable turnover is more than £85,000, you must keep a digital record of anything that’s needed for your VAT Return.

If you’ve lost a VAT invoice or it is damaged and no longer readable, ask the supplier for a duplicate (marked ‘duplicate’).

HMRC can visit your business to inspect your record keeping and charge you a penalty if your records are not in order.

You can hire a professional (such as an accountant) if you need help with your VAT.

VAT invoices

Only VAT-registered businesses can issue VAT invoices and you must:

issue and keep valid invoices - these can be paper or electronic

keep copies of all the sales invoices you issue even if you cancel them or produce one by mistake

keep all purchase invoices for items you buy

Valid invoices

You’ll use a full VAT invoice for most transactions. You can use:

a modified invoice for retail supplies over £250

a simplified invoice for retail supplies under £250 - and for other supplies from 1 January 2013

You cannot reclaim VAT using an invalid invoice, pro-forma invoice, statement or delivery note.

Include the following on your invoice, depending on which type you use.

Invoice information | Full invoice | Simplified invoice | Modified invoice

Unique invoice number that follows on from the last invoice | Yes | Yes | Yes

Your business name and address | Yes | Yes | Yes

Your VAT number | Yes | Yes | Yes

Date | Yes | No | Yes

The tax point (or ‘time of supply’) if this is different from the invoice date | Yes | Yes | Yes

Customer’s name or trading name, and address | Yes | No | Yes

Description of the goods or services | Yes | Yes | Yes

Total amount excluding VAT | Yes | No | Yes

Total amount of VAT | Yes | No | Yes

Price per item, excluding VAT | Yes | No | Yes

Quantity of each type of item | Yes | No | Yes

Rate of any discount per item | Yes | No | Yes

Rate of VAT charged per item - if an item is exempt or zero-rated make clear no VAT on these items | Yes | Yes (1) | Yes

Total amount including VAT | No | Yes (1) | Yes

(1) If items are charged at different VAT rates, then show this for each.

Accounting schemes

If you use the Cash Accounting Scheme you have to stamp an invoice with the amount of cash paid and the date.

There are different rules for record keeping and invoicing if you use a VAT Margin Scheme.

Deadlines

Usually VAT invoices must be issued within 30 days of the date of supply or the date of payment (if you’re paid in advance).

International trade

show the total VAT payable in sterling on your VAT invoice if the supply takes place in the UK

be able to provide an English translation of any invoice within 30 days if asked to do so by a visiting VAT officer

Converting to sterling

To convert to sterling you can:

use the market selling rate at the time of supply

use the European Central Bank’s rate

use HMRC’s period rates of exchange - the rates usually stay the same for each calendar month

apply to HMRC to use a different method to account for the VAT

There are different rules if you use the Tour Operator’s Scheme.

Exceptions

You do not need to issue a VAT invoice if:

your invoice is only for exempt or zero-rated sales within the UK

you’re giving goods as a gift

you sell goods under a VAT second-hand margin scheme

your customer operates a self-billing arrangement

VAT records

Records you must keep include:

copies of all invoices you issue

all invoices you receive (originals or electronic copies)

self-billing agreements - this is where the customer prepares the invoice

name, address and VAT number of any self-billing suppliers

debit or credit notes

import and export records

records of items you cannot reclaim VAT on - for example business entertainment

records of any goods you give away or take from stock for your private use

records of all the zero-rated, reduced or VAT exempt items you buy or sell

a VAT account

You must also keep general business records such as bank statements, cash books, cheque stubs, paying-in slips and till rolls.

If you use the Cash Accounting Scheme you must use these records to match them against your payment records and receipts.

If you supply digital services in the EU and use VAT MOSS, you must keep additional records.

HM Revenue and Customs (HMRC) may check your records to make sure you’re paying the right amount of tax.

Keeping digital records

VAT registered businesses with a taxable turnover of more than £85,000 must follow the rules for ‘Making Tax Digital for VAT’.

Retailers

Debit and credit notes

Record these in your accounts and keep any original notes.

VAT records for Making Tax Digital

your business uses the VAT GIANT service, for example if you’re a government department or an NHS Trust

you apply for an exemption

You can choose to sign up to Making Tax Digital for VAT if your business earns less than £85,000.

From 1 April 2022 all VAT registered businesses must sign up, whatever they earn.

Records you must keep digitally

You need to keep the following records digitally:

your business name, address and VAT registration number

any VAT accounting schemes you use

the VAT on goods and services you supply, for example everything you sell, lease, transfer or hire out (supplies made)

the VAT on goods and services you receive, for example everything you buy, lease, rent or hire (supplies received)

any adjustments you make to a return

the ‘time of supply’ and ‘value of supply’ (value excluding VAT) for everything you buy and sell

the rate of VAT charged on goods and services you supply

reverse charge transactions - where you record the VAT on both the sale price and the purchase price of goods and services you buy

your total daily gross takings if you use a retail scheme

items you can reclaim VAT on if you use the Flat Rate Scheme

your total sales, and the VAT on those sales, if you trade in gold and use the Gold Accounting Scheme

You also need to keep digital copies of documents that cover multiple transactions made on behalf of your business by:

volunteers for charity fundraising

a third party business

employees for expenses in petty cash

You must add all your transactions to your digital records, but you do not need to scan paper records like invoices or receipts.

How to keep digital records

You need to use a compatible software package or other software (like spreadsheets) that connect to HMRC systems.

If you use more than one software package to keep records and submit returns, you need to link them.

Some ways you can link your software include:

using formulas to link cells in spreadsheets

emailing records

putting records on a portable device to give to your agent

importing and exporting XML and CSV files

downloading and uploading files

You must have links between the software you use by your first VAT period after 1 April 2021.

When to send your VAT return

The deadlines for sending your VAT returns will not change after you sign up for Making Tax Digital for VAT.

To see when your next return is due, sign in to your VAT online account.

How to sign up for Making Tax Digital for VAT

How you sign up depends on whether you’re:

a business

an agent acting for a client

Sign up for Making Tax Digital for VAT

You must sign up for ‘Making Tax Digital for VAT’ if your taxable turnover is more than £85,000, so you can:

keep digital records

submit your business’s VAT return using compatible software

There’s a different way to sign up if you’re an agent.

Before you start

You must have compatible software before you sign up.

What you need

To sign up you need:

your business email address

a Government Gateway user ID and password - if you do not have a user ID, you can create one when you use the service

your VAT registration number and latest VAT return

You’ll also need:

your National Insurance number if you’re a sole trader

your company registration number and Unique Taxpayer Reference if you’re a limited company or registered society

your Unique Taxpayer Reference and the postcode where you’re registered for Self Assessment if you’re a general partnership

When to sign up

If you already pay by Direct Debit do not sign up too close to the date your return is due, or you may pay twice.

To avoid this, do not sign up less than:

7 days before your return is due

5 days after your return is due

If you do not pay by Direct Debit, sign up at least 3 days before your return is due.

If you’re finding it difficult to access the service, check if there’s a technical issue or other known problem.

Sign up now

After you’ve signed up

You should get a confirmation email from noreply@tax.service.gov.uk within 3 days of signing up. It might go to your spam folder.

Do not submit a VAT Return until you get a confirmation email.

Contact HMRC if you do not get an email.

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 are no 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

If you are registered for VAT in Northern Ireland, you must also show the VAT on any EU purchases or 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 - for example how it happened, how you corrected it

You may also need to report the error to HMRC.

Bad debts

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.

Time of supply or tax point

The tax point (or ‘time of supply’) for a transaction is the date the transaction takes place for VAT purposes.

You need to know this because, for example:

it’s included on VAT invoices

it tells you which VAT period the transaction belongs to

it tells you which VAT Return to put the transaction on

The tax point can vary, but is usually the following.

Situation | Tax point

No invoice needed | Date of supply

VAT invoice issued | Date of invoice

VAT invoice issued 15 days or more after the date of supply | Date the supply took place

Payment or invoice issued in advance of supply | Date of payment or invoice (whichever is earlier)

Payment in advance of supply and no VAT invoice yet issued | Date payment received

The date of supply is:

for goods - the date they’re sent, collected or made available (for example installed in the customer’s house)

for services - the date the work is finished

Exceptions

If you use the VAT Cash Accounting Scheme, the tax point is always the date the payment is received.

There are different tax point rules for:

certain trades - like barristers, building and construction

where the supply is not a ‘sale’ – for example business items taken for personal use

importing and exporting XML and CSV files

VAT record keeping

Overview

VAT-registered businesses must:

keep records of sales and purchases

keep a separate summary of VAT called a VAT account

issue correct VAT invoices

This guide is also available in Welsh (Cymraeg).

VAT registered businesses with a taxable turnover of more than £85,000 must follow the rules for ‘Making Tax Digital for VAT’.

How to keep VAT records

You must keep VAT records for at least 6 years (or 10 years if you used the VAT MOSS service).

If your taxable turnover is more than £85,000, you must keep a digital record of anything that’s needed for your VAT Return.

If you’ve lost a VAT invoice or it is damaged and no longer readable, ask the supplier for a duplicate (marked ‘duplicate’).

HMRC can visit your business to inspect your record keeping and charge you a penalty if your records are not in order.

You can hire a professional (such as an accountant) if you need help with your VAT.

VAT invoices

Only VAT-registered businesses can issue VAT invoices and you must:

issue and keep valid invoices - these can be paper or electronic

keep copies of all the sales invoices you issue even if you cancel them or produce one by mistake

keep all purchase invoices for items you buy

Valid invoices

You’ll use a full VAT invoice for most transactions. You can use:

a modified invoice for retail supplies over £250

a simplified invoice for retail supplies under £250 - and for other supplies from 1 January 2013

You cannot reclaim VAT using an invalid invoice, pro-forma invoice, statement or delivery note.

Include the following on your invoice, depending on which type you use.

Invoice information | Full invoice | Simplified invoice | Modified invoice

Unique invoice number that follows on from the last invoice | Yes | Yes | Yes

Your business name and address | Yes | Yes | Yes

Your VAT number | Yes | Yes | Yes

Date | Yes | No | Yes

The tax point (or ‘time of supply’) if this is different from the invoice date | Yes | Yes | Yes

Customer’s name or trading name, and address | Yes | No | Yes

Description of the goods or services | Yes | Yes | Yes

Total amount excluding VAT | Yes | No | Yes

Total amount of VAT | Yes | No | Yes

Price per item, excluding VAT | Yes | No | Yes

Quantity of each type of item | Yes | No | Yes

Rate of any discount per item | Yes | No | Yes

Rate of VAT charged per item - if an item is exempt or zero-rated make clear no VAT on these items | Yes | Yes (1) | Yes

Total amount including VAT | No | Yes (1) | Yes

(1) If items are charged at different VAT rates, then show this for each.

Accounting schemes

If you use the Cash Accounting Scheme you have to stamp an invoice with the amount of cash paid and the date.

There are different rules for record keeping and invoicing if you use a VAT Margin Scheme.

Deadlines

Usually VAT invoices must be issued within 30 days of the date of supply or the date of payment (if you’re paid in advance).

International trade

show the total VAT payable in sterling on your VAT invoice if the supply takes place in the UK

be able to provide an English translation of any invoice within 30 days if asked to do so by a visiting VAT officer

Converting to sterling

To convert to sterling you can:

use the market selling rate at the time of supply

use the European Central Bank’s rate

use HMRC’s period rates of exchange - the rates usually stay the same for each calendar month

apply to HMRC to use a different method to account for the VAT

There are different rules if you use the Tour Operator’s Scheme.

Exceptions

You do not need to issue a VAT invoice if:

your invoice is only for exempt or zero-rated sales within the UK

you’re giving goods as a gift

you sell goods under a VAT second-hand margin scheme

your customer operates a self-billing arrangement

VAT records

Records you must keep include:

copies of all invoices you issue

all invoices you receive (originals or electronic copies)

self-billing agreements - this is where the customer prepares the invoice

name, address and VAT number of any self-billing suppliers

debit or credit notes

import and export records

records of items you cannot reclaim VAT on - for example business entertainment

records of any goods you give away or take from stock for your private use

records of all the zero-rated, reduced or VAT exempt items you buy or sell

a VAT account

You must also keep general business records such as bank statements, cash books, cheque stubs, paying-in slips and till rolls.

If you use the Cash Accounting Scheme you must use these records to match them against your payment records and receipts.

If you supply digital services in the EU and use VAT MOSS, you must keep additional records.

HM Revenue and Customs (HMRC) may check your records to make sure you’re paying the right amount of tax.

Keeping digital records

VAT registered businesses with a taxable turnover of more than £85,000 must follow the rules for ‘Making Tax Digital for VAT’.

Retailers

Debit and credit notes

Record these in your accounts and keep any original notes.

VAT records for Making Tax Digital

your business uses the VAT GIANT service, for example if you’re a government department or an NHS Trust

you apply for an exemption

You can choose to sign up to Making Tax Digital for VAT if your business earns less than £85,000.

From 1 April 2022 all VAT registered businesses must sign up, whatever they earn.

Records you must keep digitally

You need to keep the following records digitally:

your business name, address and VAT registration number

any VAT accounting schemes you use

the VAT on goods and services you supply, for example everything you sell, lease, transfer or hire out (supplies made)

the VAT on goods and services you receive, for example everything you buy, lease, rent or hire (supplies received)

any adjustments you make to a return

the ‘time of supply’ and ‘value of supply’ (value excluding VAT) for everything you buy and sell

the rate of VAT charged on goods and services you supply

reverse charge transactions - where you record the VAT on both the sale price and the purchase price of goods and services you buy

your total daily gross takings if you use a retail scheme

items you can reclaim VAT on if you use the Flat Rate Scheme

your total sales, and the VAT on those sales, if you trade in gold and use the Gold Accounting Scheme

You also need to keep digital copies of documents that cover multiple transactions made on behalf of your business by:

volunteers for charity fundraising

a third party business

employees for expenses in petty cash

You must add all your transactions to your digital records, but you do not need to scan paper records like invoices or receipts.

How to keep digital records

You need to use a compatible software package or other software (like spreadsheets) that connect to HMRC systems.

If you use more than one software package to keep records and submit returns, you need to link them.

Some ways you can link your software include:

using formulas to link cells in spreadsheets

emailing records

putting records on a portable device to give to your agent

importing and exporting XML and CSV files

downloading and uploading files

You must have links between the software you use by your first VAT period after 1 April 2021.

When to send your VAT return

The deadlines for sending your VAT returns will not change after you sign up for Making Tax Digital for VAT.

To see when your next return is due, sign in to your VAT online account.

How to sign up for Making Tax Digital for VAT

How you sign up depends on whether you’re:

a business

an agent acting for a client

Sign up for Making Tax Digital for VAT

You must sign up for ‘Making Tax Digital for VAT’ if your taxable turnover is more than £85,000, so you can:

keep digital records

submit your business’s VAT return using compatible software

There’s a different way to sign up if you’re an agent.

Before you start

You must have compatible software before you sign up.

What you need

To sign up you need:

your business email address

a Government Gateway user ID and password - if you do not have a user ID, you can create one when you use the service

your VAT registration number and latest VAT return

You’ll also need:

your National Insurance number if you’re a sole trader

your company registration number and Unique Taxpayer Reference if you’re a limited company or registered society

your Unique Taxpayer Reference and the postcode where you’re registered for Self Assessment if you’re a general partnership

When to sign up

If you already pay by Direct Debit do not sign up too close to the date your return is due, or you may pay twice.

To avoid this, do not sign up less than:

7 days before your return is due

5 days after your return is due

If you do not pay by Direct Debit, sign up at least 3 days before your return is due.

If you’re finding it difficult to access the service, check if there’s a technical issue or other known problem.

Sign up now

After you’ve signed up

You should get a confirmation email from noreply@tax.service.gov.uk within 3 days of signing up. It might go to your spam folder.

Do not submit a VAT Return until you get a confirmation email.

Contact HMRC if you do not get an email.

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 are no 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

If you are registered for VAT in Northern Ireland, you must also show the VAT on any EU purchases or 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 - for example how it happened, how you corrected it

You may also need to report the error to HMRC.

Bad debts

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.

Time of supply or tax point

The tax point (or ‘time of supply’) for a transaction is the date the transaction takes place for VAT purposes.

You need to know this because, for example:

it’s included on VAT invoices

it tells you which VAT period the transaction belongs to

it tells you which VAT Return to put the transaction on

The tax point can vary, but is usually the following.

Situation | Tax point

No invoice needed | Date of supply

VAT invoice issued | Date of invoice

VAT invoice issued 15 days or more after the date of supply | Date the supply took place

Payment or invoice issued in advance of supply | Date of payment or invoice (whichever is earlier)

Payment in advance of supply and no VAT invoice yet issued | Date payment received

The date of supply is:

for goods - the date they’re sent, collected or made available (for example installed in the customer’s house)

for services - the date the work is finished

Exceptions

If you use the VAT Cash Accounting Scheme, the tax point is always the date the payment is received.

There are different tax point rules for:

certain trades - like barristers, building and construction

where the supply is not a ‘sale’ – for example business items taken for personal use

downloading and uploading files

VAT record keeping

Overview

VAT-registered businesses must:

keep records of sales and purchases

keep a separate summary of VAT called a VAT account

issue correct VAT invoices

This guide is also available in Welsh (Cymraeg).

VAT registered businesses with a taxable turnover of more than £85,000 must follow the rules for ‘Making Tax Digital for VAT’.

How to keep VAT records

You must keep VAT records for at least 6 years (or 10 years if you used the VAT MOSS service).

If your taxable turnover is more than £85,000, you must keep a digital record of anything that’s needed for your VAT Return.

If you’ve lost a VAT invoice or it is damaged and no longer readable, ask the supplier for a duplicate (marked ‘duplicate’).

HMRC can visit your business to inspect your record keeping and charge you a penalty if your records are not in order.

You can hire a professional (such as an accountant) if you need help with your VAT.

VAT invoices

Only VAT-registered businesses can issue VAT invoices and you must:

issue and keep valid invoices - these can be paper or electronic

keep copies of all the sales invoices you issue even if you cancel them or produce one by mistake

keep all purchase invoices for items you buy

Valid invoices

You’ll use a full VAT invoice for most transactions. You can use:

a modified invoice for retail supplies over £250

a simplified invoice for retail supplies under £250 - and for other supplies from 1 January 2013

You cannot reclaim VAT using an invalid invoice, pro-forma invoice, statement or delivery note.

Include the following on your invoice, depending on which type you use.

Invoice information | Full invoice | Simplified invoice | Modified invoice

Unique invoice number that follows on from the last invoice | Yes | Yes | Yes

Your business name and address | Yes | Yes | Yes

Your VAT number | Yes | Yes | Yes

Date | Yes | No | Yes

The tax point (or ‘time of supply’) if this is different from the invoice date | Yes | Yes | Yes

Customer’s name or trading name, and address | Yes | No | Yes

Description of the goods or services | Yes | Yes | Yes

Total amount excluding VAT | Yes | No | Yes

Total amount of VAT | Yes | No | Yes

Price per item, excluding VAT | Yes | No | Yes

Quantity of each type of item | Yes | No | Yes

Rate of any discount per item | Yes | No | Yes

Rate of VAT charged per item - if an item is exempt or zero-rated make clear no VAT on these items | Yes | Yes (1) | Yes

Total amount including VAT | No | Yes (1) | Yes

(1) If items are charged at different VAT rates, then show this for each.

Accounting schemes

If you use the Cash Accounting Scheme you have to stamp an invoice with the amount of cash paid and the date.

There are different rules for record keeping and invoicing if you use a VAT Margin Scheme.

Deadlines

Usually VAT invoices must be issued within 30 days of the date of supply or the date of payment (if you’re paid in advance).

International trade

show the total VAT payable in sterling on your VAT invoice if the supply takes place in the UK

be able to provide an English translation of any invoice within 30 days if asked to do so by a visiting VAT officer

Converting to sterling

To convert to sterling you can:

use the market selling rate at the time of supply

use the European Central Bank’s rate

use HMRC’s period rates of exchange - the rates usually stay the same for each calendar month

apply to HMRC to use a different method to account for the VAT

There are different rules if you use the Tour Operator’s Scheme.

Exceptions

You do not need to issue a VAT invoice if:

your invoice is only for exempt or zero-rated sales within the UK

you’re giving goods as a gift

you sell goods under a VAT second-hand margin scheme

your customer operates a self-billing arrangement

VAT records

Records you must keep include:

copies of all invoices you issue

all invoices you receive (originals or electronic copies)

self-billing agreements - this is where the customer prepares the invoice

name, address and VAT number of any self-billing suppliers

debit or credit notes

import and export records

records of items you cannot reclaim VAT on - for example business entertainment

records of any goods you give away or take from stock for your private use

records of all the zero-rated, reduced or VAT exempt items you buy or sell

a VAT account

You must also keep general business records such as bank statements, cash books, cheque stubs, paying-in slips and till rolls.

If you use the Cash Accounting Scheme you must use these records to match them against your payment records and receipts.

If you supply digital services in the EU and use VAT MOSS, you must keep additional records.

HM Revenue and Customs (HMRC) may check your records to make sure you’re paying the right amount of tax.

Keeping digital records

VAT registered businesses with a taxable turnover of more than £85,000 must follow the rules for ‘Making Tax Digital for VAT’.

Retailers

Debit and credit notes

Record these in your accounts and keep any original notes.

VAT records for Making Tax Digital

your business uses the VAT GIANT service, for example if you’re a government department or an NHS Trust

you apply for an exemption

You can choose to sign up to Making Tax Digital for VAT if your business earns less than £85,000.

From 1 April 2022 all VAT registered businesses must sign up, whatever they earn.

Records you must keep digitally

You need to keep the following records digitally:

your business name, address and VAT registration number

any VAT accounting schemes you use

the VAT on goods and services you supply, for example everything you sell, lease, transfer or hire out (supplies made)

the VAT on goods and services you receive, for example everything you buy, lease, rent or hire (supplies received)

any adjustments you make to a return

the ‘time of supply’ and ‘value of supply’ (value excluding VAT) for everything you buy and sell

the rate of VAT charged on goods and services you supply

reverse charge transactions - where you record the VAT on both the sale price and the purchase price of goods and services you buy

your total daily gross takings if you use a retail scheme

items you can reclaim VAT on if you use the Flat Rate Scheme

your total sales, and the VAT on those sales, if you trade in gold and use the Gold Accounting Scheme

You also need to keep digital copies of documents that cover multiple transactions made on behalf of your business by:

volunteers for charity fundraising

a third party business

employees for expenses in petty cash

You must add all your transactions to your digital records, but you do not need to scan paper records like invoices or receipts.

How to keep digital records

You need to use a compatible software package or other software (like spreadsheets) that connect to HMRC systems.

If you use more than one software package to keep records and submit returns, you need to link them.

Some ways you can link your software include:

using formulas to link cells in spreadsheets

emailing records

putting records on a portable device to give to your agent

importing and exporting XML and CSV files

downloading and uploading files

You must have links between the software you use by your first VAT period after 1 April 2021.

When to send your VAT return

The deadlines for sending your VAT returns will not change after you sign up for Making Tax Digital for VAT.

To see when your next return is due, sign in to your VAT online account.

How to sign up for Making Tax Digital for VAT

How you sign up depends on whether you’re:

a business

an agent acting for a client

Sign up for Making Tax Digital for VAT

You must sign up for ‘Making Tax Digital for VAT’ if your taxable turnover is more than £85,000, so you can:

keep digital records

submit your business’s VAT return using compatible software

There’s a different way to sign up if you’re an agent.

Before you start

You must have compatible software before you sign up.

What you need

To sign up you need:

your business email address

a Government Gateway user ID and password - if you do not have a user ID, you can create one when you use the service

your VAT registration number and latest VAT return

You’ll also need:

your National Insurance number if you’re a sole trader

your company registration number and Unique Taxpayer Reference if you’re a limited company or registered society

your Unique Taxpayer Reference and the postcode where you’re registered for Self Assessment if you’re a general partnership

When to sign up

If you already pay by Direct Debit do not sign up too close to the date your return is due, or you may pay twice.

To avoid this, do not sign up less than:

7 days before your return is due

5 days after your return is due

If you do not pay by Direct Debit, sign up at least 3 days before your return is due.

If you’re finding it difficult to access the service, check if there’s a technical issue or other known problem.

Sign up now

After you’ve signed up

You should get a confirmation email from noreply@tax.service.gov.uk within 3 days of signing up. It might go to your spam folder.

Do not submit a VAT Return until you get a confirmation email.

Contact HMRC if you do not get an email.

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 are no 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

If you are registered for VAT in Northern Ireland, you must also show the VAT on any EU purchases or 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 - for example how it happened, how you corrected it

You may also need to report the error to HMRC.

Bad debts

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.

Time of supply or tax point

The tax point (or ‘time of supply’) for a transaction is the date the transaction takes place for VAT purposes.

You need to know this because, for example:

it’s included on VAT invoices

it tells you which VAT period the transaction belongs to

it tells you which VAT Return to put the transaction on

The tax point can vary, but is usually the following.

Situation | Tax point

No invoice needed | Date of supply

VAT invoice issued | Date of invoice

VAT invoice issued 15 days or more after the date of supply | Date the supply took place

Payment or invoice issued in advance of supply | Date of payment or invoice (whichever is earlier)

Payment in advance of supply and no VAT invoice yet issued | Date payment received

The date of supply is:

for goods - the date they’re sent, collected or made available (for example installed in the customer’s house)

for services - the date the work is finished

Exceptions

If you use the VAT Cash Accounting Scheme, the tax point is always the date the payment is received.

There are different tax point rules for:

certain trades - like barristers, building and construction

where the supply is not a ‘sale’ – for example business items taken for personal use