If your limited company is VAT registered, you have additional record-keeping requirements beyond standard company documents. This comprehensive guide explains what VAT records you must keep, how to format VAT invoices correctly, and your obligations under Making Tax Digital.
All limited companies must keep certain records, but VAT registration adds extra requirements. Here's what changes when you register for VAT:
Key Point: VAT-registered companies must keep all records for a minimum of 6 years, and VAT-specific documents must include detailed information to satisfy HMRC requirements.
Every invoice you issue to customers
Unique invoice number
Sequential and not repeated
Your business name and address
Full registered company details
Your VAT registration number
Clearly displayed
Invoice date
Date of supply or tax point
Customer name and address
Who you're invoicing
Description of goods/services
Clear and detailed
Price excluding VAT
Net amount
VAT rate charged
Standard (20%), reduced (5%), or zero (0%)
Total VAT amount
Calculated VAT in pounds
Total amount including VAT
Gross amount payable
Simplified Invoices: For retail supplies under £250 (including VAT), you can issue simplified invoices with fewer details, but it's best practice to include all information.
To reclaim VAT on business expenses
You must keep valid VAT invoices from your suppliers to reclaim input VAT. These invoices should contain the same information as your sales invoices.
Keep all VAT invoices showing business purchases. You can only reclaim VAT if you have a valid VAT invoice.
Any credit notes received or issued must be kept and recorded correctly to adjust your VAT calculations.
If you trade internationally, keep customs declarations, shipping documents, and proof of export/import.
Warning: Without a valid VAT invoice, you cannot reclaim input VAT. Make sure your suppliers provide proper VAT invoices.
Evidence of your VAT submissions
Copies of all VAT returns submitted to HMRC
Usually quarterly or monthly, showing output and input VAT
Working papers and calculations
How you arrived at the figures on your VAT return
Proof of payment or refund
Bank statements showing VAT paid to or received from HMRC
Making Tax Digital (MTD) is a government initiative requiring businesses to keep digital VAT records and submit VAT returns using MTD-compatible software.
All VAT-registered businesses with taxable turnover above the VAT threshold (currently £90,000)
Businesses below the threshold can voluntarily join MTD
You must use HMRC-approved software to keep your VAT records and submit returns. Popular options include:
Good news: Using MTD-compatible software automatically ensures your VAT records meet HMRC's digital record-keeping requirements.
If you use the VAT Cash Accounting Scheme, keep detailed records of when payments are actually received and made.
If using the Flat Rate Scheme, record your gross turnover and the flat rate percentage used to calculate VAT.
Clearly separate and record any exempt or zero-rated supplies, as these affect your VAT calculations differently.
If you trade with EU or international customers, keep detailed records including country of supply and customer VAT numbers.
You must keep all VAT records for at least
6 Years
from the end of the accounting period they relate to
If HMRC is investigating your VAT affairs, you must keep records until the investigation is complete, even if that's longer than 6 years.
Default surcharge of 2-15% of VAT owed, increasing with repeated late submissions
Penalties of up to 100% of tax lost if HMRC finds deliberate errors
Up to £3,000 penalty for failure to keep adequate VAT records
Poor records increase the likelihood of HMRC conducting a detailed inspection
Protection: Accurate, complete VAT records protect you from penalties and make HMRC inspections straightforward.
Use MTD-compatible accounting software
Software like FreeAgent, Xero, or QuickBooks automatically formats VAT invoices correctly and tracks VAT
Check supplier VAT invoices carefully
Make sure they include all required information before you pay and attempt to reclaim VAT
Reconcile VAT accounts regularly
Monthly reconciliation helps spot errors early and makes preparing VAT returns easier
Keep digital and paper backups
Cloud storage for digital records and secure filing for important paper documents
Get professional help
An experienced accountant ensures VAT compliance and can handle complex situations
Valid VAT sales invoices
Supplier VAT invoices
VAT return submissions
Working calculations
Credit notes
Import/export documents
MTD-compatible software
Bank statements
Retain all VAT records for at least 6 years
At Taxwise Accountancy, we specialise in helping VAT-registered businesses stay compliant. From setting up MTD-compatible software to managing your VAT returns, we're here to make VAT simple.
Get registered for VAT correctly from the start
Accurate and timely VAT return submissions
Making Tax Digital software configuration
Whether you're newly VAT registered or need help catching up with record-keeping, our expert accountants provide comprehensive VAT support tailored to your business.
VAT Invoices: Must contain 10 specific pieces of information including VAT number and rate
Purchase Records: Keep valid VAT invoices from suppliers to reclaim input VAT
VAT Returns: Submit digitally via MTD-compatible software if turnover above £90k
Retention: Keep all VAT records for minimum 6 years
Penalties: Up to £3,000 for missing records, plus surcharges for late returns