Recording Your VAT Transactions

If you’re VAT registered you’re required to submit a VAT return to the HMRC, usually quarterly.

Net (without VAT) sales and purchase figures, VAT charged on sales and VAT paid on purchases and European transactions (not covered here), which can all be calculated from the figures recorded in your bookkeeping system, have to be shown on the VAT return.

If the VAT charged on sales is more than the VAT paid on purchases, you pay the difference over to the HMRC.

If the VAT paid on purchases is more than the VAT charged on sales, the difference is paid to you from the HMRC.

Most VAT registered businesses will be required to add the standard VAT rate (20% at the time of writing) to all their sales.

Note: Check with the HMRC or your Accountant to discover the correct VAT rates that you should be charging for your goods and services.

Your sales invoices should show the value of your goods or service with the VAT rate and amount shown separately. Your invoice also has to show your VAT number. When you record a sale in your accounts, both the net value (the amount minus VAT) should be shown as sales income, and the VAT amount should be shown separately as VAT charged. A computerised system will do this automatically when you create the sales invoice.

If you want to reclaim the VAT on purchases from VAT registered suppliers, the HMRC require an invoice/receipt showing the supplier’s VAT number, the VAT rate and amount charged. If you lose a receipt and are unable to get a copy, you cannot reclaim the VAT, meaning the transaction has to be recorded as if the company is not VAT registered, using the gross (cost + VAT) amount. You should record the VAT registered purchases for which you have receipts, showing the net value as the purchase type and the VAT amount as VAT paid.

Recording all your transactions this way means that you can easily calculate the figures to be entered on your VAT return.

Some Very General Guidelines *if in any doubt at all, check with the HMRC*

Business Entertaining – VAT cannot be reclaimed

Staff Entertaining – VAT can often be reclaimed, except for alcohol

Food purchased whilst business travelling (subsistence) – if VAT charged, it can be reclaimed

Business mileage in personal vehicles – VAT can be reclaimed using calculations provided by the HMRC, more information here.

Stamps – exempt VAT

Plane, train and tram tickets – 0% VAT

For further information on VAT


Your sales invoices should show your goods or service charge, VAT rate, VAT amount and your VAT registration number.

In your accounts, record the net cost of a purchase separately from the VAT amount charged.

If in any doubt about any VAT transactions, contact the HMRC helpline on 0300 200 3700.


  • Record VAT on sales and purchases separately in your books
  • This will help calculate figures for your VAT return
  • Sales invoices should show your goods or service charge, VAT rate, VAT amount and VAT registration number
  • You must have a VAT receipt to reclaim VAT you have paid on business purchases

Apr 16, 2015