Beware the VAT man commeth

 

The VAT man will ask you to keep a lot of records.  But there are reasons for keeping even more!

 

If you are registered for VAT, you must keep certain business records and VAT records of your sales and purchases. You must also keep a separate summary of your VAT, called a ‘VAT account’.

And you have to keep them all for six years.  After that technically you don’t have to keep all the detailed records but it is certainly wise to keep as much as you can.

The reason for this caution is easy to understand. Most companies show trends in the way they trade, with occasional events in between. To give a simple example, you might spend £300 a month on envelopes and paper, but maybe once every couple of years you spend a lot more on this in order to do a large promotional mailing.

Or maybe you produce commemorative mugs and the like. You have a regular level of purchase but each time there is a royal event you spend an awful lot more.

Now you can explain all this to the VAT inspector, but if the VAT inspector feels there is something amiss, he/she may not believe you. In that case if you can go back further in your history you will be able to show other “special events” of a similar type, and that might help you persuade the inspector that all is well.

There is no set way of keeping these records and accounts. In most cases they can be easily adapted from your normal business records. The main thing is to ensure that they are complete and up to date and that it is easy for VAT officers to access them when you have a VAT inspection.

Which is why some firms choose to have a lot of extra records – just in case.

Such regulations, and the natural caution of any company that has ever had cause to deal with Revenue and Customs over a VAT matter mean that companies tend to keep more and more data, including…

  • annual accounts, including profit and loss accounts
  • bank statements and paying-in slips
  • cash books and other account books
  • orders and delivery notes
  • purchase and sales books
  • records of daily takings such as till rolls
  • relevant business correspondence

But that’s only the start because in general, you must keep the following VAT records:

  • Records of all the standard-rated, reduced-rated, zero-rated and exempt goods and services that you buy or sell.
  • Copies of all sales invoices you issue. Except: if you are a retailer you do not have to keep copies of any less detailed VAT invoices for items under £250 including VAT – unless your customer has asked for a VAT invoice.
  • All purchase invoices for items you buy.
  • All credit notes and debit notes you receive.
  • Copies of all credit notes and debit notes you issue.
  • Any self-billing agreements you make as a supplier.
  • Copies of self-billing agreements you make as a customer and name, address and VAT registration number of the supplier.
  • Records of any goods you give away or take from stock for your private use including rate and amount of VAT.
  • Records of any goods or services bought for which you cannot reclaim the VAT, such as business entertainment.
  • Any documents dealing with special VAT treatment, such as reliefs or zero-rating by certificate.
  • Records of any goods you export.
  • Records of any taxable self-supplies you make – for example if you sell cars and you use one of your cars in stock for business purposes.
  • Any adjustments such as corrections to your accounts or amended VAT invoices.

Six years worth of all that lot means a lot of room is taken up.  Which is why a significant number of companies choose to keep their VAT records with Admiral Document Storage. 

If you would like to know more give us a call on 0800 810 1125.