All businesses have to keep records of their transactions, mainly receipts and payments, in order to pay the right amount of VAT etc. HM Revenue & Customs have a very good guide which tells you all about this.
Click here to see the HMRC factsheet.
I can give you a made to measure Excel based system which makes the burdensome but necessary task of dealing with VAT as easy as it could ever be, even including the complications of partial exemption for which the adjustments to input tax are calculated automatically. It’s all as easy and straightforward as entering figures in an analysis book but provides lots more:
Bank account integration - seamlessly links with your business bank account by downloading statements from the bank's website directly into your Excel file, providing instant reconciliation.
Analysis – as well as the usual details and summaries of sales, direct costs and overheads, necessary to provide periodic production of accounts for management and tax purposes, you also have Project Analysis, the facility to see gross sales, costs and profitability for each project, including drilling down to list individual items.
Instant VAT returns – everything you need for a monthly or quarterly VAT return – just by entering an opening date. Returns can easily be traced back to all the source entries, resulting in thorough and quick inspections making for a happy VAT inspector!!
Tax liability through the year – Sole traders and partnerships will be able to see how their tax and Class 4 National Insurance bill is building up each month of their accounts year, so they can get an accurate estimate of how much they should be putting by for those January and July payments.
Ease of use – the Excel file includes data validation and error checking, together with User Buttons to invoke macros – programs which perform formatting and reporting operations which might otherwise take twenty minutes, all accomplished with a single click, so everything has been designed to make the system extremely easy and safe to use, even for anyone who is not very familiar with Excel.