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Record to report (part 6)

Updated 25 September 2024

© Crown copyright 2024

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This publication is available at https://www.gov.uk/government/publications/help-with-vat-compliance-controls-guidelines-for-compliance-gfc8/record-to-report-part-6

Read purpose, scope and audience (part 1) and general approach to VAT compliance controls (part 2) of Help with VAT compliance controls — Guidelines for Compliance GfC8, if you have not already.

Record to report (R2R) is an accounting process which involves collecting, processing and presenting information to provide strategic, financial and operational analysis. It also covers the steps involved in preparing and reporting the overall accounts which are typically stored in the general ledger.

R2R covers both external and internal reporting. Generally, the R2R function is not engaged in processing transactions, instead focusing on the aggregation of existing data to meet reporting requirements.

The main ‘record’ process is general ledger updates from the sub-ledgers, such as postings from sales or purchases. The main exception to this rule is the direct posting of journals to the general ledger.

Data gathered and organised in the general ledger can be used to produce financial reports, for example:

  • balance sheets
  • profit and loss statements
  • cashflow statements
  • budget reports
  • management performance reports

VAT reporting, because of its close affiliation with the general ledger, would usually be considered a part of R2R. This key process is covered in a stand-alone section.

Overall system implementation

Configuration of an accounting system is concerned with the selection of pre-defined settings and functionality. A system may also be customised, which involves more bespoke changes being made. This may include additional coding by the software provider or third parties with specialist system knowledge. 

Control points

  1. Configuration settings are VAT compliant, for example transaction document types are compliant with UK VAT regulations.
  2. Software providers and appropriately skilled implementation partners support UK VAT compliance when customisations are required.
  3. Standard system templates, particularly tax templates, are compliant with UK VAT regulations.
  4. Software provider system updates are UK VAT compliant.

General ledger operation

General ledger options and operation will have an impact on tax reporting.

Control points

  1. Correct implementation and regular maintenance of the chart of accounts to support VAT posting and reporting.
  2. Parallel accounting ledgers support UK VAT reporting requirements.
  3. Correct implementation of cost centres and profit centres to support VAT posting and reporting.
  4. Accurate set-up of non-sterling currency options in terms of rates and updating where this takes place in the general ledger.
  5. The number of open posting periods should be authorised and kept to a minimum to avoid error.
  6. The re-opening of closed periods should require authorisation.
  7. Sub-ledger posting failures should be reported and promptly investigated.
  8. Direct posting of journals to the general ledger should require authorisation.
  9. Integration of third party systems should include testing the interface and posting to the general ledger.
  10. General ledger periods and dates should support accurate VAT posting and reporting.
  11. Accounting precision, being the number of decimal places (including non-sterling billing variations) should conform to VAT regulations.
  12. Numeric rounding rules should conform to VAT regulations.
  13. A general ledger change log should be maintained, which records when changes have been made and by whom.
  14. Chart of accounts changes should require authorisation and be promptly communicated to the relevant users.
  15. Chart of accounts updates are automatically reflected in systems and applications, rather than manual import.
  16. Reconciliations should be performed between the general ledger control accounts and VAT reports.

VAT reporting parameters

VAT reporting may occur from a dedicated dataset, tailored from the general ledger and the sales and purchases sub-ledgers.

Control points

  1. VAT reporting should be Making Tax Digital compliant.
  2. VAT reporting should enable VAT group consolidated reporting, where required.
  3. VAT reporting should include relevant VAT adjustments.
  4. Reporting parameters should be compatible with regulation tax points.
  5. Transactions in suspense accounts or with on-hold status should be checked.
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