What records must VAT-registered businesses keep digitally under 'Making Tax Digital' rules?

Under the 'Making Tax Digital' (MTD) rules, VAT-registered businesses are required to maintain comprehensive digital records to ensure compliance and facilitate smoother tax reporting processes. The correct answer emphasizes the necessity of keeping detailed information including the business name, address, and all VAT transaction details.

This approach fosters better accuracy, accountability, and efficiency in tax reporting. The requirement for all VAT transaction details means businesses must record not only revenues but also purchases and other relevant data that contribute to the calculation of VAT due or claimable. By digitizing these records, businesses can leverage technology to streamline the submission of VAT returns to HMRC, thereby reducing the risk of errors and improving the overall tax management process.

Maintaining merely VAT amounts for exports, as suggested in one of the incorrect options, would not satisfy the requirements outlined by MTD, which calls for a comprehensive approach to record-keeping. Similarly, the notion of records not needing to be digital is entirely contrary to the core objective of MTD, which is to digitalize tax compliance. Lastly, keeping only sales records is insufficient, as it does not encompass the full scope of transactions that affect VAT calculation, such as purchases and adjustments that need to be reported.

Therefore, the focus on detailed and