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How To Record Your VAT Book? – A Simple Breakdown of VAT Records

Oct 4, 2023 | UK Accounting

Struggling with VAT records? This blog will provide a simple breakdown of what you need to know! Keep reading to learn about essential records, going digital, and simplified invoicing for retailers.

How to record your VAT book: Simple Breakdown

While there may be more glamorous parts of running a business, keeping accurate and up-to-date VAT records is absolutely essential since it is required by law.

However, the idea of poring over receipts and invoices doesn’t sound like the most exciting way to spend your time. That’s why we’re here to help you maximize your time.

In this blog, we’ll break down everything you need to know about VAT records in a way that’s easy to understand. We’ll cover what records you need to keep, how to keep them, and why it’s crucial to get them right.

How To Record Your VAT Book? – What VAT Records to Keep?

As laid down by HMRC, you need to keep the following records for VAT compliance:

  1. Sales and purchases record, including receipts, invoices, and credit notes.
  2. Record of charged VAT on your sales and paid VAT on your purchases.
  3. A record of your VAT account. This includes your VAT registration number, the amount of VAT you owe, and the amount you can reclaim.
  4. Record any adjustments to your VAT account, such as correcting errors or adjusting for bad debts.
  5. Records of any goods you move within and outside the EU.

For more accurate details of VAT records to keep according to your business type and needs, you may want to seek professional advice from an accountant or tax professional.

Why are VAT records so important?

Accurate VAT records are essential for compliance with HM Revenue and Customs (HMRC) regulations. Furthermore, failure to maintain proper VAT records can result in hefty penalties; no business owner wants to deal with that headache.

In addition to compliance, VAT records can also give you an overview of your financial health. Through VAT records, you can better understand your cash flow and possibly identify areas where you can cut costs.

How to keep digital records?

In today’s digital age, it’s becoming increasingly common for businesses to keep their VAT records digitally. This is an eco-friendlier option than keeping piles of paper receipts, making record-keeping much more efficient and less time-consuming.

A few options are available for recording your VAT book digitally, but one popular choice is to use accounting software specifically designed for VAT record-keeping.

You can also enjoy additional features from some accounting software, such as automated invoicing, expense tracking, and VAT calculations, making it easy to accomplish your recording. You can also use it to submit your VAT returns.

However, keep in mind that when using digital VAT records, the software you use should be compatible and can communicate with HMRC’s Making Tax Digital system.

Aside from accounting software, there are also other digital tools available to help you how to record your VAT book. Some apps even allow you to scan and digitize your receipts, making it easy to keep track of your expenses.

There are also online platforms that offer cloud-based storage for your records, allowing you to access them from anywhere with an internet connection easily.

Simplified Invoices for Retailers

As a retailer, it’s essential to understand the concept of simplified invoices and how they relate to your VAT records. Simplified invoices are a simplified version of a VAT invoice that can be issued ONLY under certain conditions. These conditions are:

  1. The total amount (including VAT) is less than £250
  2. The invoice only includes certain types of supplies, such as cash sales or sales to consumers
  3. The invoice does not include any supplies to other EU member states

Simplified invoices are designed to make record-keeping easier for businesses, as they don’t need to include as much information as a full VAT invoice. However, it’s important to note that simplified invoices must still include certain information, such as:

  1. A unique invoice identification number
  2. Supplier’s name and address
  3. Supplier’s VAT registration number
  4. A description of the goods or services sold (with quantity sold for each)
  5. The VAT rate per item – must be explicitly disclosed if zero-rated or exempt
  6. The total amount charged, including any VAT

If you issue simplified invoices as a retailer, it’s important to keep accurate records of these transactions.

You should also make sure that your accounting software or records system is set up to handle simplified invoices and that you can distinguish between simplified and full VAT invoices.

Frequently Asked Questions

  • Can I use a simplified invoice for all my sales?

    No, simplified invoices are only suitable for certain types of sales, such as cash sales or sales to consumers. If you’re selling goods or services to another VAT-registered business, you must provide a full VAT invoice.

  • Do I need to keep separate records for different VAT rates? 

    Yes, you should keep separate records for each VAT rate you charge or pay. This will make it easier to calculate your VAT liability and ensure you’re charging the correct VAT rate on your sales.

  • Can I use accounting software to keep my VAT records?

    Yes, many businesses use accounting software for this purpose. The software must be able to record all the information required by HMRC, and you should keep digital copies of all your invoices and receipts.


VAT records are required by law for VAT-registered businesses in the UK. By maintaining accurate records, businesses can ensure compliance with VAT regulations, avoid penalties and legal issues, and gain valuable insights into their operations. 

For professional tax advice, consult us at Sterlinx Global.

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