The next step

VAT Notice 700/63

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How long do you need to keep VAT records?

Six-year retention period

Generally, you must keep all of your business records for at least six years. This is also the period that is relevant to other taxes. Once the six-year period has expired, you can destroy all of your accounting records:

• sales and purchase invoices, order forms and delivery notes, customer correspondence, etc.
• for retailers, records of daily takings, such as till rolls
• bank statements and paying-in slips
• import and export documents
• cash books and other accounting ledgers, although these will usually be electronic.

Tip. If the six-year rule will cause you a serious problem with storage or undue expense, ask HMRC for a shorter retention period.

Electronic invoicing?

Electronic sales invoices will reduce your storage of paperwork and therefore potentially save money for your business with reduced costs. There are other benefits, including structured data for effective auditing; improved tracing of your sales orders; quick access and retrieval of your documents; and security and easier dispute handling.

There is no need to notify HMRC of your decision to issue electronic invoices but you must ensure they can be properly stored and contain the usual information required on a tax invoice, e.g. your VAT number, details of goods or services being supplied, amount of VAT being charged, etc.

Tip.VAT Notice 700/63 (see The next step ) is headed “Electronic invoicing” and explains all of the issues you must put in place to avoid potential problems.

Trap. For a temporary period where you are trialling your new electronic invoicing system, you can issue both paper and electronic invoices to your customers. Once the trial is over, you must stop the dual system and the electronic invoice will be the legal document for VAT.

Is six years enough?

There are some situations where you should keep your records beyond the six-year period, as they will be relevant to your future supplies:

Option to tax letters from HMRC. If you opted to tax a property with HMRC, you should always keep the acknowledgement letter you received confirming your election because future tenants or buyers will request this document as proof that your VAT charge on rent or the building sale is correct.

Capital goods scheme. If you paid VAT when you purchased a building costing more than £250,000 excluding VAT, or you have spent this amount or more on improving, extending or refurbishing it, you must adjust your original input tax claim over the next ten years, so it is important to keep all purchase invoices that relate to the initial expenditure.

Fixed assets. In some cases, the VAT you charge on an asset sale - or not charge - will depend on whether you paid VAT when you purchased it, e.g. a car sale. It is sensible to keep invoices for asset purchases beyond the six-year period.

Tip. If you sell your business as a going concern, you will need to provide invoices and documents to your buyer about the capital goods scheme.

The next step: VAT Notice 700/63