It has never been more important to keep good VAT records, with HMRC vowing to scrutinise the tax affairs of those who have payments outstanding after 28 February.
When it comes to VAT, this can be an expensive problem, as the business has no right to claim input VAT unless it holds a valid VAT invoice.
HMRC’s VAT Outstanding Return campaign is focused on businesses that have VAT returns outstanding.
Over 50,000 businesses that have failed to submit VAT returns will have their tax affairs closely scrutinised by the Revenue from 28 February if they fail to voluntarily come forward.
According to HMRC, records businesses should keep are:
• VAT records of sales and purchases
• Separate summary of VAT, or VAT account
• No set way of keeping records, but can be adapted from normal business records
HMRC has the discretion to accept alternative evidence in the absence of a valid VAT invoice, but in this case the tribunal would only allow for around £6,000 of the claim.
While the VAT Act 1994 was amended in 2003 to allow HMRC to accept additional information as alternative evidence, what it accepts as this is tightly controlled.
Input tax deduction without a valid VAT invoice – HMRC Statement of Practice
1. Do you have alternative documentary evidence other than an invoice (e.g. supplier statement)?
2. Do you have evidence of receipt of a taxable supply on which VAT has been charged?
3. Do you have evidence of payment?
4. Do you have evidence of how the goods/services have been consumed within your business or their onward supply?
5. How did you know that the supplier existed?
6. How was your relationship with the supplier established? For example:
7. How was contact made?
8. Do you know where the supplier operates from (have you been there)?
9. How do you contact them?
10. How do you know they can supply the goods or services?
11. If goods, how do you know the goods are not stolen?
12. How do you return faulty supplies?
For more information on VAT records and record keeping, see:
•HMRC: Accounts and records for your VAT