What Records Do I Need to Keep for VAT

Keeping accurate VAT records is essential for every VAT-registered business. HMRC requires detailed records of sales, purchases, and VAT calculations to ensure your VAT returns are correct. This guide explains what records you must keep, how long to store them, and how to stay compliant under the Making Tax Digital (MTD) rules.

Introduction

VAT-registered businesses must keep specific records to show how they have calculated and reported VAT. These records form the basis of your VAT returns and must be accurate, complete, and accessible for HMRC inspection.

Failing to maintain proper records can lead to penalties or interest charges if errors occur in your VAT reporting.

The main VAT records you must keep

HMRC requires all VAT-registered businesses to maintain three core types of VAT records:

VAT account.

VAT invoices.

Business records relating to sales and purchases.

These records should show the VAT you have charged on sales (output tax) and the VAT you have paid on purchases (input tax).

VAT account

A VAT account is a summary that shows how you worked out the figures on your VAT return. It must include:

The total output tax due on sales.

The total input tax you can reclaim.

Adjustments for errors, bad debt relief, or reverse charge transactions.

The VAT payable to or reclaimable from HMRC.

If you use accounting software, this summary is created automatically, but you are still responsible for checking its accuracy.

VAT invoices

VAT invoices are essential evidence for both sales and purchases. You must issue VAT invoices for all standard-rated and reduced-rated supplies to VAT-registered customers.

A valid VAT invoice must include:

A unique invoice number.

The date of issue and the tax point (the date VAT becomes due).

The seller’s name, address, and VAT registration number.

The customer’s name and address.

A description of the goods or services supplied.

The quantity or volume of goods (if applicable).

The net amount (excluding VAT), the VAT rate, and the total VAT charged.

The total invoice amount including VAT.

If you receive an invoice for business purchases, you should keep it as evidence of input tax you wish to reclaim.

Business records

In addition to VAT invoices, HMRC requires you to keep supporting business records such as:

Sales and purchase ledgers.

Till receipts or Z reports from cash registers.

Credit and debit notes issued or received.

Import and export documentation.

Records of zero-rated or exempt sales.

Details of any self-billing arrangements.

Records of goods supplied or received under the domestic reverse charge.

These records provide a full audit trail and help HMRC verify your VAT returns if requested.

Digital record keeping under Making Tax Digital (MTD)

Under the Making Tax Digital rules, all VAT-registered businesses must keep VAT records digitally using MTD-compatible software.

This means you must:

Record your sales and purchase details electronically.

Use digital links between systems (no manual copying and pasting).

Submit your VAT returns directly to HMRC through approved software.

MTD-compatible software includes popular accounting platforms such as Xero, QuickBooks, Sage, and FreeAgent, as well as bridging software for spreadsheet users.

What you must record digitally

Your digital records must include:

The time of supply (tax point).

The value of the supply (excluding VAT).

The rate of VAT charged.

Your VAT registration number.

Information about any adjustments or reverse charge transactions.

If you use more than one software package, they must be connected through digital links that meet HMRC standards.

How long to keep VAT records

You must keep your VAT records for at least six years (or ten years if you use the VAT MOSS scheme for digital services).

Records can be stored electronically, on paper, or a combination of both, but they must be complete, legible, and accessible if HMRC requests them.

If you stop trading or deregister for VAT, you must still retain your VAT records for the required period.

Special records for certain VAT schemes

If your business uses a specific VAT accounting scheme, you may need to keep additional records.

Flat Rate Scheme

If you use the Flat Rate Scheme, you must keep:

Details of your turnover and the flat rate percentage used.

A record of all sales receipts.

Copies of invoices issued to customers.

Margin Scheme

For the VAT Margin Scheme (used for second-hand goods, art, or antiques), keep:

Purchase and sales invoices.

A margin calculation record showing the difference between the purchase and selling price.

Retail Scheme

If you operate a retail scheme, retain:

Daily gross takings summaries.

Till rolls or POS reports.

VAT calculation methods used for your retail business.

Reverse Charge

If you receive or supply services under the domestic reverse charge, you must record:

The value of the supply.

The VAT due under the reverse charge.

Confirmation that VAT was not charged on the invoice.

Record keeping for imports and exports

If you trade internationally, you must keep additional documents such as:

Customs import and export declarations.

Proof of shipment or delivery.

Commercial invoices and contracts.

Certificates of origin or VAT exemption where applicable.

These records are essential for proving that zero-rated VAT treatment applies to exported goods.

What happens if your VAT records are incomplete

If you cannot provide full VAT records during an HMRC inspection, you may face:

Estimated VAT assessments based on available information.

Interest and penalties for underpaid or late VAT.

Potential compliance checks or investigations.

Keeping accurate and organised VAT records protects your business from errors and unnecessary HMRC scrutiny.

Example scenario

Sarah runs an online clothing store and is VAT registered. She uses accounting software to record all sales and purchases digitally. Her software automatically generates VAT invoices, calculates VAT due, and stores data securely.

When HMRC requests an inspection, Sarah can easily provide her VAT account, sales records, and proof of export for her overseas sales. Her compliance with MTD ensures the inspection goes smoothly, and no penalties are issued.

Common mistakes to avoid

Failing to record all sales or purchase invoices digitally.

Losing VAT receipts or proof of export documents.

Mixing business and personal expenses in VAT records.

Relying on manual calculations instead of digital links under MTD.

Not keeping records for the full six-year period.

Reviewing your records regularly helps ensure your VAT returns are accurate and compliant.

Conclusion

Every VAT-registered business in the UK must keep detailed records of its sales, purchases, and VAT calculations. Under Making Tax Digital, these records must be stored electronically and maintained for at least six years.

Accurate record keeping not only helps you complete VAT returns correctly but also protects your business if HMRC reviews your accounts. By using reliable accounting software and keeping invoices, ledgers, and supporting documents organised, you can stay compliant and avoid costly mistakes.