If your business is VAT-registered, HMRC requires you to keep detailed records of all VAT charged and paid. The rules are strict — particularly around invoice requirements — and mistakes can result in denied input tax claims. This guide covers the three types of VAT invoices, what documentation you need, and how Making Tax Digital affects VAT record keeping.
Three Types of VAT Invoices
1. Full VAT Invoice
Required for most business-to-business transactions. Must include:
- A unique sequential invoice number
- Seller’s name, address, and VAT registration number
- Buyer’s name and address
- Date of supply (or tax point)
- Description of goods or services
- Unit price excluding VAT
- VAT rate applied to each item
- Total VAT amount
- Total amount including VAT
2. Simplified VAT Invoice
Permitted for retail transactions under £250 (including VAT). Only requires:
- Seller’s name, address, and VAT number
- Date of supply
- Description of goods or services
- Total amount including VAT
- VAT rate charged
The buyer’s details are not required on simplified invoices.
3. Modified VAT Invoice
For retail transactions over £250. Similar to a full invoice but shows prices inclusive and exclusive of VAT for each line item.
Common VAT Receipt Mistakes
- Credit/debit card slips are NOT valid VAT receipts — they do not contain the supplier’s VAT number or an itemised breakdown
- Missing VAT registration number — without the supplier’s VAT number, you cannot reclaim input VAT on purchases over £250
- Not separating VAT on invoices — for full invoices, the VAT amount must be shown separately
- Keeping only bank statements — a bank transaction does not contain the detail required for a VAT claim
VAT Record Retention
VAT records must be kept for at least 6 years. This includes:
- All VAT invoices issued and received
- Credit and debit notes
- Import and export documentation
- VAT account summaries
- Records of any VAT adjustments
MTD for VAT
Making Tax Digital for VAT has been mandatory for all VAT-registered businesses since April 2022. Under MTD for VAT, you must keep digital records that include the VAT rate applied to each transaction and submit VAT returns using compatible software. The same digital links requirement applies — no manual re-keying between systems.
If you are also self-employed with income above the ITSA thresholds, you will need to comply with both MTD for Income Tax and MTD for VAT.
Managing VAT Receipts
SparkReceipt’s AI receipt scanner captures VAT details (including the VAT registration number and tax breakdown) automatically when you scan a receipt or invoice. All documents are stored for 10+ years, exceeding HMRC’s 6-year requirement. Connect your email to automatically capture digital invoices from suppliers.
For general record keeping rules, see HMRC record keeping requirements. For a complete expense guide, see self-employed expenses UK.
This article is for informational purposes only and does not constitute tax advice. Consult a qualified accountant or tax adviser for your specific situation.
