A VAT account is the separate record you must keep of the VAT you charged on your sales and the VAT you paid on your purchases. It provides the link between your business records and your VAT Return. You need to add up the VAT in your sales and purchases records and then transfer these totals to your VAT account, using separate headings for VAT payable and VAT reclaimable/deductible.
You can keep your VAT account in whatever way suits your business best, as long as it includes the following information about the VAT that you:
- owe on your sales
- owe on acquisitions from other European Union (EU) countries
- have to pay on behalf of your supplier under a reverse charge procedure
- owe following a correction or error adjustment
- can reclaim from your business purchases
- can reclaim on acquisitions from other EU countries
- are entitled to following a correction or error adjustment
You must also keep records of any adjustments that you make such as balancing payments if you use annual accounting for VAT.
You can use the information from your VAT account to complete your return at the end of each accounting period. You subtract your VAT reclaimable from your VAT payable, to gives you the net amount of VAT you pay to or reclaim from HMRC.
Unless you are using the cash accounting scheme, you must pay the VAT you have charged customers during the accounting period that relates to the return, even if they have not paid you.
Get information about what needs to be shown in VAT accounts for sales
Get information about what needs to be shown in VAT accounts for purchases
Find out about VAT Returns and paying or reclaiming VAT
Get information about the cash accounting scheme
Use our jargon-busting glossary to help with the basics of VAT
See what a VAT account might look like in VAT Notice 700/21
More about keeping VAT records and accounts in VAT Notice 700/21
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