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:-

 

    • Require taxpayers to maintain the records specified by statute and

 

    • Permit HMRC to specify by legendary legislation the additional records that must be maintained and retained, for example to comply with EU law.

 

 

 

 

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:-

 

    • His business and accounting records

 

    • His VAT account

 

    • Copies of all VAT invoices issued by him

 

    • VAT invoices received by him

 

    • Documentation relating to acquisition or dispatch of goods to and from the EC

 

    • Documentation relating to importation and exportation by him and

 

    • All credit notes or other documents which evidence an increase or decrease in consideration that are received, and copies of all such documents that are issued by him (Value Added Tax Regulations 1995 (SI 1995/2518), reg. 31(1)).

 

 

 

 

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.

 

This includes:-

 

    • Every supply of goods or services you receive on which you are charged VAT by your suppliers

 

    • Services listed in Section 31 (Sch. 5 services) which you receive from abroad

 

    • Every EC acquisition, importation or removal from warehouse

 

    • All the supplies made by your business (including any zero-rated or exempt supplies)

 

    • Any goods you have exported

 

    • Any gifts or loans of goods

 

    • Any taxable self-supplies – for example, cars

 

    • Any goods which you acquire or produce in the course of the business which you put to private or other non-business use

 

 

 

 

You must also record adjustments such as:-

 

    • Corrections to your accounts

 

    • Amended VAT invoices

 

    • Any credits you allow or receive and

 

    • Any goods which you acquire or produce in the course of your business which you put to private or other non-business use.’

 

 

 

 

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:-

 

    • Annual accounts, including profit and loss accounts

 

    • Bank statements and paying in slips

 

    • Cash books and other account books

 

    • Credit or debit notes you issue or receive

 

    • Documentation relating to dispatches/acquisitions of goods to/from EC Member States

 

    • Documents or certificates supporting special VAT treatment such as relief on supplies to visitingforces or zero-rating by certificate

 

    • Import and export documents

 

    • Orders and delivery notes

 

    • Purchase and sales books

 

    • Purchase invoices and copy sales invoices

 

    • Record of daily takings such as till rolls

 

    • Relevant business correspondence and

 

    • Your VAT account.

 

 

Computer Produced Invoices

 

HMRC have special powers under VATA 1994, Sch. 11, para. 3 relating to the production and transmission of VAT invoices by computer.

 

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