Finance Act 2008, s. 115 and Sch. 37, introduced a new record keeping requirement that applies to all taxes administered by HMRC, including VAT. The new provisions:-
In addition, HMRC will provide guidance on the records that they would expect to find for particular types of business.
HMRC acknowledge that normal business records will generally be sufficient for satisfying the statutory requirement. It is not expected that the record keeping requirement for Vat purposes will change greatly from what was required prior to FA 2008. This is explained below.
Every taxable person shall, for the purpose of accounting for VAT, keep and preserve the following records:-
HMRC can add to this list for any trade or business of a description specified by them or for the purposes of any scheme established under the Act or regulations. They may also vary the terms of any notice either by issuing a fresh one or by issuing a notice which amends an existing one.
The records must be preserved for a period of six years, or such lesser period as HMRC may allow (Value Added Tax Act 1994, Sch. 11, para. 6(3)).
The VAT account is divided into separate parts relating to the trader’s prescribed accounting periods. These parts are divided into two portions – ‘the tax payable portion’ and the ‘tax allowable portion’. The tax payable portion comprises the total output tax payable for the prescribed accounting period, adjusted as required in accordance with reg. 34 and 38 and any other regulations made under the Act. The tax allowable portion comprises the total input tax allowable for the same prescribed accounting period, similarly adjusted.
For VAT purposes, the trader’s records must include records of all operations connected with his business which affect the amount of VAT which he has to pay or can reclaim.
Set out below are the guidelines published in Notice 700 (April 2002), para. 19.2.2:-
You must keep records of all operations connected with your business which affect the amount of VAT you have to pay or can reclaim.
You must also record adjustments such as:-
Under VATA 1994, Sch. 11, para. 6, HMRC can specify what records must be kept for VAT purposes and, after specifying that ‘taxable persons must keep and preserve certain records and accounts’, HMRC issued Notice 700 to amplify this general requirement. Some of the guidance provided in the notice is now included in the specific requirements of the Value Added Tax Regulations 1995, reg. 31.
Regulation 31(1)(a) refers to business records, examples of which are given in Notice 700 (April 2002), para. 19.2.3:-
HMRC have special powers under VATA 1994, Sch. 11, para. 3 relating to the production and transmission of VAT invoices by computer.