With many Freelancers switching to the cash accounting VAT scheme following updates to the flat rate scheme in April 2017, it’s a good idea to check the purchase receipts you collect are valid for VAT check scrutiny.
What must a VAT invoice or receipt include in order to reclaim the VAT?
To qualify for VAT inclusion, the receipt must include;
- Business name and address of vendor
- VAT Number
- Tax Point (Date)
- Description of Item
- Rate of VAT charged per item *
- Total amount including VAT *
* If items are charged at different VAT rates, or if an item is exempt or zero-rated, then this should be clear for each item.
Never be shy about asking for a VAT receipt. They are necessary as part of legitimately reclaiming VAT on purchases and vendors are used to being asked to provide them.
What about Contactless?
With the advent of ‘Contactless’ you could be forgiven for thinking a Contactless transaction entry on your bank statement, or Contactless payment receipt is enough to satisfy the revenue.
However, this is not the case as the entry/receipt does not display the necessary information; supplier, description of what was purchased, date, VAT number and VAT breakdown.
When using contactless, always ask the vendor to print out a VAT receipt. They won’t usually mind, it covers you off for VAT and provides a handy breakdown of the VAT charged, which helps with data entry.
This is even more important to obtain a VAT receipt with the introduction of Making Tax Digital (or MTD) in April 2019, where transactions need to be backed up by an electronic receipt, attached as proof of purchase.
Don’t forget your own sales invoices need to adhere to the criteria if you are VAT registered. If your sales invoice is over £250 you will also need to supply;
- Unique invoice number which follows on from the last
- Customers trading name and address
- Total amount excluding VAT
- Total amount of VAT
- Price, quantity and any discount per item
What’s the bottom line?
Always ask the till operator or receipt provider to print a VAT receipt. It will save you money by being able to reclaim the maximum amount possible, is needed for MTD and will cover your transaction in the event of an inspection.