What to Include on a Valid VAT Invoice

What is it?

A VAT invoice is issued by a VAT registered company when a taxable supply is made.

There are three types of VAT invoices:

• Full VAT invoice
• Modified VAT invoices
• Simplified VAT invoice

A VAT invoice should be issued within 30 days from the date of supply, or if payment is received in advance, within 30 days of receipt.

Who is it for?

Only VAT registered businesses can issue VAT invoices.

How does it work?

A Full VAT Invoice is required to contain the following information:

1. The supplier’s company name, address and contact information
2. The customer’s name and address 
3. A unique sequential invoice number
4. The supplier’s VAT registration number
5. The tax point date (also known as the date of supply) that the goods/services were provided
6. The date of the invoice (this may be the same at the tax point date)
7. A clear description of what is being invoiced, (including quantity and cost of each item if applicable)
8. The net amount (total amount excluding VAT) being charged
9. VAT amount

Other points to consider, if applicable:

• If you chose to put the directors name on the invoices, you must include all directors of the company
• Reference to reverse charge (please seek professional advise if unsure)
• Rate of any discount applied, per item

Simplified and Modified Invoices are usually issued in the retail sector. Simplified invoices are for retail goods that are £250 or less, modified invoices are for retail sales over £250.

Simplified invoices are not required to include as much information as a full VAT invoice (as their name suggests they are a condensed version). Examples of where you would receive a simplified invoice include: supermarkets, petrol stations and hardware stores.

The following information is required on a simplified invoice: unique sequential invoice number, business name and address, VAT number, tax point date, description of goods/services, gross amount (total amount including VAT) and clear indication if an item is exempt or zero rated (supermarkets normally use an asterisk to symbolise this and/or produce a VAT summary by VAT rate at the bottom of the receipt.)

A modified VAT invoice is similar to a full invoice, but also includes the total amount including VAT (Gross amount).

You do not need to issue a VAT invoice if:

• You are not VAT registered, (in this case a standard invoice is needed. The difference between a VAT invoice and a standard invoice is no VAT is charged.)
• The sale of goods or services is exempt from VAT
• Your customer is not VAT registered
• You have gifted the service or goods being received
• You have a self-billing agreement in place with your customer

What should I do next?

If you are VAT registered, it is important that the VAT invoices you produce are compliant with the rules listed above.

You will also need to ensure that you have received valid VAT invoices for all input VAT that you declare on your VAT returns. HMRC may disallow input VAT on transactions where a corresponding VAT invoice is not held.

It is a legal requirement to keep either digital or hard copy records of all invoices for a minimum of six years, (or ten years if you are registered for MOSS VAT returns.)

Common problem areas:

1. A unique sequential invoice number has not been implemented; this means it can be hard to keep track of how many invoices have been issued, if duplicates have been raised or to check that payments received have been allocated correctly.
2. Invoices have been deleted/superseded/amended. If you need to amend or cancel an invoice the best way to do this is to raise a credit note and re-issue the invoice. Raising a credit note ensures a clear audit trail, making it easier to reconcile if queried at a later date.
3. Pro-forma invoices are normally issued as a way to request payment and are often mistreated as VAT invoices, however, they will not include an invoice number and should be clearly labelled as a Pro-forma. Once the Pro-forma has been paid in full, a valid VAT invoice should then be issued. It is only at this point that the VAT can be reclaimed.
    

If you have any queries regarding the above or have any other questions relating to your VAT returns. Please do not hesitate to contact Corina Hall on 01865 261100 or via email.

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