VAT is a common charge we see on receipts. As a business owner, keeping VAT receipts is a legal requirement. These receipts are needed to claim back VAT on business purchases. Let’s understand what a valid VAT receipt looks like and how to keep good records. In addition, we’ll be checking out VAT exemption, VAT charges, and more.
What is a VAT Receipt?
VAT receipts detail your purchases and the VAT paid. In the UK, VAT-registered businesses must provide VAT receipts upon request. It’s crucial to store these receipts safely for your VAT return. They prove the VAT paid and ensure accurate tax calculations. Some transactions under £25 allow VAT claims without a receipt.
What is VAT?
VAT, or Value Added Tax, is a tax on things you buy, like goods and services. If your suppliers are VAT-registered, they charge you VAT on your purchases. If your business is VAT-registered too, you charge your customers VAT on what you sell. You keep track of the VAT you pay and collect. At tax time, you calculate the difference. This determines if you owe a VAT refund.
How does a VAT Receipt and a VAT invoice differ?
In general, they’re pretty much the same, but VAT invoices are typically used more for recording business expenses. For instance, if you buy a laptop for personal use, you’ll get a receipt showing the VAT paid. But if it’s for business, you’ll also get a VAT invoice. For purchases under £250, retailers can give a simplified VAT invoice. A full one is only needed if asked for.
What are VAT invoice requirements?
To reclaim VAT, you need to show the original purchase receipt, also known as the VAT invoice, to HM Revenue and Customs (HMRC). Thus, your invoice can also be termed as an HMRC invoice. A valid VAT receipt should have:
- Seller’s VAT registration number
- List of purchased items
- Unique invoice number
- Business addresses of both buyer and seller
- Tax date (date of supply)
- Business names of both buyer and seller
- Receipt issuance date
These HMRC invoice requirements should not be missed. Missing or incorrect information may prevent VAT reclaims. Delivery notes, letters, or emails aren’t valid VAT receipts. Check your invoices carefully to avoid issues. Alternatively, our accountants can assist you.
What’s in your VAT Receipt?
Not all VAT receipts need to include every detail. Retailers can issue simplified VAT invoices for sales under £250 including VAT, if requested. A simplified VAT receipt must show:
- Supplier name and business address
- Supplier VAT registration number
- Date of supply or tax point
- Description of goods or services supplied
If the sale includes items with different VAT rates, the receipt must show each item’s applicable VAT rate and the total price including VAT. VAT-exempt supplies, like postage stamps, shouldn’t be included on simplified invoices or modified VAT invoices.
Best Practices for VAT Recordkeeping
Holding onto valid VAT receipts is crucial for proving how much VAT you’ve paid and claimed back on your VAT returns during inspections. Remember to check your receipts for VAT charges, as they might not always be included. Keep a VAT account to track output tax on sales, acquisitions, reverse charge procedures, error adjustments, and other VAT-related adjustments.
What if I lose my VAT receipt?
Losing VAT receipts is common, especially for small purchases or from local shops. In such cases, you can support your claim with alternative proof of payment, like a bank statement or credit card record. Good record-keeping practices can help minimize lost receipts. That’s included as basic VAT receipt rules.
How to store VAT receipts?
You must retain copies of every VAT invoice and receipt for up to 6 years.
Are VAT receipts and regular receipts different?
Yes, a VAT receipt itemizes the Value Added Tax (VAT) applied to the transaction, providing a breakdown of the total cost and associated tax, unlike a regular receipt.
Why do people request a VAT receipt?
People primarily request VAT receipts for business or reimbursement purposes. These receipts enable individuals and businesses to track and reclaim the VAT portion of transactions, which is important for accounting, tax reporting, and expense reimbursements.
VAT laws Under UK law, VAT-registered businesses must provide customers with VAT receipts upon request. If a supplier fails to provide one, you are legally entitled to request it. Similarly, if you fail to provide a VAT receipt to your customers, they have the right to request it. Additionally, all VAT-registered businesses must maintain transaction logs for at least six years, ensuring records are kept in good condition and easily accessible.
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