If you own a business in the UK, don’t miss out on everything you need to know about issuing VAT invoices. Read on to learn how to prepare a VAT invoice and its deadlines, requirements, and exceptions.
VAT in the UK: Overview of VAT invoice
As a business owner, it’s essential to understand your responsibilities regarding VAT (Value Added Tax). One of the crucial aspects of VAT compliance is issuing VAT invoices to your customers.
Whether you’re just starting your business or have been running it for years, this blog post will discuss what you need to stay compliant and keep your customers satisfied. Get ready to become a VAT invoice expert; keep reading until the end!
Types of VAT Invoices and the Information Needed
Depending on the type of invoice, the following should be included in every VAT invoice you issue. We created a comprehensive table for you to picture the differences between the three types:
|Information Needed||Full Invoice||Simplified Invoice||Modified Invoice|
|A unique invoice identification number||✓||✓||✓|
|Supplier’s name and address||✓||✓||✓|
|Supplier’s VAT registration number||✓||✓||✓|
|The name and address of the customer||✓||X||✓|
|A description of the goods or services sold (with quantity sold for each)||✓||✓||✓|
|The time and date of issuance||✓||X||✓|
|The time and date the supply was made (can be the same as the date of issuance)||✓||X||✓|
|Price per item (excluding VAT)||✓||X||✓|
|The total amount charged (excluding VAT)||✓||X||✓|
|The total amount of VAT||✓||X||✓|
|The VAT rate per item – must be explicitly disclosed if zero-rated or exempt||✓||✓||✓|
|Price per item (VAT-inclusive)||X||X||✓|
|The total amount payable (including VAT)||X||✓||✓|
Full VAT Invoice
When you are not sure of what type of invoice to use, you can never go wrong with the full VAT invoice since this is the most common one.
Simplified VAT Invoice
This type of invoice is ONLY allowed for transactions that involve a value of less than £250 (including VAT).
Modified VAT Invoice
The modified VAT Invoice is essentially the same as the full invoice but also adds (1) the price per item (VAT-inclusive) and (2) the total amount payable (including VAT).
These two items are not required in the full VAT invoice but are added to the modified VAT invoice if agreed upon with the client.
When to Issue a VAT Invoice?
You can issue a VAT invoice up to 14 days after the goods or services have been delivered. This gives you a bit of leeway if you forget to issue an invoice at the time of the transaction or if your customer requests an invoice at a later date.
How to Issue a VAT Invoice?
There are different methods for issuing VAT invoices in the UK, including paper and electronic invoices.
But bear in mind that if you issue electronic invoices, you must obtain the recipient’s consent to receive them electronically. Additionally, you must ensure that electronic invoices are secure, can’t be altered, and are stored in a way that prevents loss or destruction.
Cases when you do NOT need to issue a VAT Invoice
While generally, it is a legal requirement to issue a VAT invoice for all taxable supplies of goods or services in the UK, there are certain cases when you do not need to issue one:
- Self-billing arrangements
- Gifts of goods
- VAT second-hand margin schemes.
- Exempt or zero-rated sales within the UK
International Trade and VAT Invoices
If you’re involved in international trade, you must follow specific rules regarding VAT invoices, especially if you issue them in a foreign currency or language.
UK to EU Country
If you supply goods or services to a customer in another EU country, you may need to register for VAT in that country and issue a VAT invoice that meets their requirements.
In addition, you may need to complete an EC Sales List to declare the value of goods or services supplied to customers in other EU countries.
However, after Brexit, businesses based in Great Britain (England, Scotland, and Wales) are not required to charge VAT on services they sell to EU countries. Therefore, VAT invoices consisting of VAT amounts are not required to be issued to such customers.
On the other hand, Northern Ireland-based businesses may continue charging VAT similar to the pre-Brexit era since they are still part of the EU regulatory frameworks and may follow the EU VAT rules.
UK to Non-EU Country
If you supply goods or services to a customer outside the EU, you won’t need to charge VAT on the supply, but you may still need to issue an invoice that meets their requirements.
VAT Invoice in a Foreign Language
You can issue VAT invoices in a foreign language if you choose to do so. This can be useful when dealing with customers who are non-English speakers.
However, if the HM Revenues and Customs (HMRC) requires an English translation of the invoice, you must provide it within 30 days of the request.
VAT Invoice in a Foreign Currency
If your business is based in the UK and sells products to customers in a foreign currency, the VAT amount must be converted into sterling for reporting purposes.
The conversion should be based on the exchange rate on the date of the supply of goods or services. You can use the exchange rates published by HMRC or another reliable source.
Frequently Asked Questions
Can I issue a VAT invoice for sale to a customer outside the EU?
No, you cannot issue a VAT invoice for a sale made to a customer outside the EU, as these sales are zero-rated for VAT purposes. However, you may need to provide other documentation to comply with the relevant customs and export regulations.
Can I issue a VAT invoice for a payment that has not yet been received?
Yes, you can issue a VAT invoice for a payment that has not yet been received, but you will need to account for the VAT in the relevant VAT return period.
Should I issue a VAT invoice for sales made through e-Commerce?
Yes, you are required to issue a VAT invoice for those sales.
In addition, it’s worth noting that if you sell through third-party e-Commerce platforms, they may handle the invoicing process for you. However, your responsibility to ensure that the invoices comply with HMRC requirements remains.
Issuing VAT invoices is an essential part of running a business. It ensures that you comply with HMRC regulations and provides your customers with all the necessary information they need to claim back any VAT they are entitled to.
VAT accountants can further guide you on how to prepare a VAT invoice suitable for your business and other VAT requirements you need to comply with.