VAT Invoices Guide for UK Businesses: How to Handle VAT Invoices
Smooth business functions require proper record keeping and handling, and VAT records are no exception. VAT Invoices are essential records that hold significant financial value, particularly in the case of reclaiming the VAT amount. Therefore, knowing when and how you, as a business entity, are required to charge VAT is important.
This blog clarifies all the details associated with Invoicing requirements according to UK VAT laws. For this purpose, the matters of issuing VAT Invoices to local and foreign businesses have been covered.
VAT Invoice Requirements
VAT Invoices hold important fiscal value and are used for accounting purposes. As a VAT-registered business, it is crucial for you to keep Invoice records. They are issued to the concerned clients and allow the recipient to reclaim VAT.
UK has followed the country’s VAT regulations since Brexit. Both the UK and the European Union have declared their own VAT requirements associated with when and how a business must issue a VAT Invoice.
The businesses that operate in the UK and the ones that trade between the UK and the EU might find this article interesting.
VAT Invoice Requirements – UK Businesses
UK VAT laws have categorized the supplies into three groups. VAT is charged on the items differently according to the category they might fall under. These categories are standard-rated, reduced-rated, and zero-rated (See FAQs).
Also, the supplier and recipient both must be VAT registered in order to issue the VAT Invoices.
Moreover, three forms of VAT Invoices, namely simplified, modern, and full, can be issued to the clients based on the total amount of sales that have been generated. The following subsections are dedicated to further elaborating the requirements.
UK VAT Invoice – When
According to the government of the UK, VAT Invoices are issued only when the supplier delivers goods and services that fall under the standard rated and reduced rated category.
If the supplies are zero-rated or the recipient is not VAT registered, then it is not necessary to issue the invoice.
However, there exist exceptions. VAT Invoice can be issued for the clients who ask for it since it cannot be checked if they are VAT registered. VAT Invoices are not necessary in the cases of self-billing, authenticated receipts, the gifts of goods.
UK VAT Invoice – How-To
According to the UK government, there are two possible ways to issue a VAT invoice. You can either issue them electronically or as a paper document. As per governmental advice, the electronic method is prioritized since it is more manageable.
However, the stakeholders must be mindful of the security of the electronic document.
VAT Invoice Requirements – Trades between EU and UK
In the post-Brexit situation, businesses headquartered in the UK are not required to charge VAT on services they sell to European countries. Therefore, the Invoices consisting of VAT amounts are not required to be issued to such customers.
Selling to EU Businesses
It is to be noted that England, Scotland, and Wales are not part of the EU after Brexit. However, Northern Ireland is still a part of the European Union.
Therefore, businesses based in Great Britain must not charge VAT to European clients. Consequently, there is no need to include VAT Invoice.
On the contrary, Great Britain-based businesses are required to observe other obligations if they choose to sell abroad to EU clients. Such companies are required to obtain the EORI number in order to generate sales abroad.
Moreover, they must also consider the requirements associated with the customs.
However, Northern Ireland Businesses may continue charging VAT similar to the pre-Brexit era. This is because they are still part of the EU regulatory frameworks and, therefore, may follow the EU VAT rules.
Moreover, if such businesses intend to sell items to UK-based clients, then they shall follow the UK’s VAT regulations.
Purchasing from EU Businesses
In case of purchasing from an EU business, the UK-based clients shall be required to consider paying the import VAT. In such a scenario, the buyers would be required to acquire the C79 certificate.
This certificate shall authenticate all the VAT payments observed by the buyers and allow them to reclaim VAT.
VAT Invoice Requirements – International Trade
International trading includes dealings with foreign languages and currencies. UK government has laid out specific rules for the businesses involved in such matters.
International trade – VAT Invoice and Foreign Languages
The government of the UK allows businesses to issue VAT Invoices in foreign languages. However, if the HM Revenues and Customs department require the English translation, then it would be necessary to provide them with it within 30 days.
International trade – VAT Invoice and Foreign Currency
In the case of selling products from UK based location, if the VAT invoice is issued in the foreign currency, then the respective business must consider converting the VAT amount into sterling.
Frequently Asked Questions
What is the categorization for VAT rates?
VAT rates are applied according to four categorical types. These are divided according to the type of item being sold.
1. The standard rate. A 20% VAT is charged. This rate is applied to all the general items.
2. Reduced rate. A 5% VAT is charged. It is charged on the items for children and old citizens.
3. Moreover, domestic fuels and power supplies are also included in this category.
4. Zero rates. A 0% VAT is charged. This rate is intended for children’s wearables, books, exports, food, etc.
5. Exempt. VAT is not applied to financial properties, insurance, sports, medical, and similar transactions.
When can you issue a simplified invoice?
A simplified invoice can be issued if all of the below conditions exist:
1. the value of the supply is £250 or less
2. your customer agrees to a simplified Invoice
3. if your business is based in Northern Ireland, your customer must not be from an EU member state
Can I issue an electronic invoice?
Invoices can be issued or received electronically rather than on paper. This is known as electronic invoicing.
VAT Invoices are important financial records. They are issued according to UK VAT laws. They are required to be issued to the clients who ask for them. Moreover, they can be issued through paper or online media.
All the selling and purchasing that takes between the EU and UK are now considered export and import since Brexit. UK government has declared laws for selling to foreign locations. These laws concern dealing with foreign languages and currency.
We at Sterlinx skilfully and efficiently assist with all the accounting and eCommerce matters. We value your business and understand the importance of your time and attention. We provide you with an opportunity to focus on your important affairs while we manage your VAT and accounting matters.