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VAT Account for Record Keeping UK

A VAT account is a system of recording and separating Value Added Tax data. Businesses must keep records of the amount of VAT charged on sales and paid on purchases.

BOOKKEEPING VAT ACCOUNT: There are no strict rules on how VAT accounts should get formulated. But they must all include:

  1. The total amounts of VAT on all business purchases.
  2. The total amounts of VAT on all business sales.
  3. VAT the company owes to Her Majesty’s Revenue and Customs.
  4. The VAT amount that the business can reclaim from HMRC.
  5. The flat rate percentages and turnover that applies if you are using the VAT Flat Rate Scheme.
  6. The VAT on any EU purchases or sales. Also known as acquisitions and dispatches respectively.

Note: You will use the figures from the business VAT account to fill in the company VAT Return.

How to Fix Errors in a VAT Account

What if you find an error in the company return? In this case you should:

  • Re-submit your business Value Added Tax account.
  • Include the date when the error first occurred.
  • Explain the details of how it occurred and the action taken to correct it.

Note: In some cases you will also need to report the error to HM Revenue and Customs.

Writing Off Bad Debts

Her Majesty’s Revenue and Customs define a ‘bad debt’ as an unpaid invoice exceeding six months. To write of a bad debt the business must create a separate ‘VAT bad debt account’.

A bad debt account will need to show:

  • The total amount of Value Added Tax involved.
  • The amount you are writing off from an invoice that has been partly paid. Include any part payments.
  • The tax amount that you are claiming on the debt.
  • The period or periods that the VAT invoices got paid for which you are claiming relief (refund).
  • The details of the original invoice such as the date, the amount, and customer name.

Note: You must keep these particular VAT records available to HMRC for at least four (4) years.

Bookkeeping VAT Account Rules for Record Keeping in the United Kingdom