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HMRC VAT Records: What Your Small Business Must Keep

HMRC requires VAT-registered businesses to keep specific records for at least 6 years. Get it wrong and you risk penalties during an inspection. The good news: digital record-keeping not only satisfies these requirements — it makes compliance automatic.

1 March 20257 min read

What HMRC requires you to keep

  • Business name and address
  • VAT registration number
  • Date and amount of every VAT taxable supply made or received
  • VAT charged on sales and reclaimed on purchases
  • Original purchase invoices showing VAT (not just receipts)
  • Import/export documentation if applicable
  • Adjustment records for errors or corrections

Making Tax Digital (MTD) requirements

Under MTD for VAT, all VAT-registered businesses must keep digital records and submit VAT returns using compatible software. Paper records are no longer sufficient for VAT purposes. Your accounting software (like FreeAgent) handles the submission — but it needs accurate data to work from.

HMRC can request records up to 4 years after the relevant VAT return date (6 years in some cases). All purchase invoices must have the supplier's VAT number on them to be valid for reclaim.

How invoice automation helps with compliance

When invoices flow through InboxBill into FreeAgent automatically: every invoice is stored digitally with the original PDF attached, VAT amounts are extracted and categorised correctly, supplier VAT numbers are captured from the document, and FreeAgent maintains the full audit trail HMRC expects.

Common VAT record mistakes to avoid

  • Reclaiming VAT on invoices not addressed to your business
  • Missing or illegible supplier VAT numbers
  • Confusing gross and net amounts when entering into software
  • Not keeping the original document (a summary isn't enough)
  • Applying wrong VAT rates (e.g. 20% on reduced-rate items)

Keep perfect VAT records automatically

InboxBill extracts VAT amounts and syncs to FreeAgent with original PDFs attached.

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