VAT Record Keeping and Making Tax Digital: What Every UK Business Must Know

The Importance of VAT Record Keeping in the Digital Era

Accurate VAT record keeping isn’t just good practice — it’s a legal requirement. HMRC expects businesses to keep detailed records of all sales, purchases, and VAT calculations.

Since the rollout of Making Tax Digital (MTD), businesses must also keep these records in digital form and submit VAT returns through approved software. Failing to comply can lead to penalties, interest, and unnecessary stress.

This article simplifies the rules around VAT records and MTD so business owners can understand exactly what’s required.

What VAT Records Do You Need to Keep?

Businesses must keep the following:

• Sales invoices (showing VAT charged)

• Purchase invoices/receipts (for input VAT claims)

• Credit notes (both issued and received)

• Import/export documentation (where applicable)

• VAT account — a summary that pulls together totals of output VAT (on sales) and input VAT (on purchases).

👉 HMRC requires these records to be kept for at least 6 years.

Making Tax Digital (MTD) for VAT

What is MTD?

MTD is HMRC’s system that requires VAT-registered businesses to:

• Keep VAT records digitally.

• Use HMRC-approved accounting software to submit VAT returns.

• Maintain “digital links” between records, meaning data can’t be retyped or manually adjusted without leaving an audit trail.

Who Must Comply?

• All VAT-registered businesses must follow MTD rules, regardless of turnover.

• Exemptions are rare (e.g., certain religious organisations or those unable to use digital tools due to age/disability).

👉 HMRC Source: Making Tax Digital for VAT.

Common Pitfalls in VAT Record Keeping

• Mixing personal and business expenses — leads to incorrect VAT claims.

• Losing receipts — without proof, HMRC can deny your input VAT claim.

• Relying on spreadsheets without digital links — under MTD, copy-and-paste between systems may not comply.

Why Good VAT Records Matter

• Compliance: Avoid penalties and investigations.

• Cashflow: Ensure you’re reclaiming all input VAT you’re entitled to.

• Audit readiness: HMRC can request records at any time.

• Strategic insight: Good records give you visibility on margins and VAT liabilities.

How Wexley & Associates Helps

At Wexley & Associates, we ensure clients are fully compliant by:

• Setting up MTD-approved software tailored to their needs.

• Implementing efficient digital record keeping.

• Reconciling VAT accounts to prevent errors.

• Providing ongoing support so compliance never becomes a last-minute scramble.

Ensure Compliance with Digital VAT Solutions

VAT compliance isn’t just about submitting a return — it’s about keeping accurate, digital-first records that withstand HMRC scrutiny.

👉 Speak to Wexley & Associates today to take the stress out of VAT record keeping and MTD compliance.

References

• HMRC: VAT record keeping

• HMRC: Making Tax Digital for VAT

• Related Article: HMRC Simplified – VAT Deadlines and Penalties Explained