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What is a VAT invoice?

If your business is VAT registered, then whenever you supply taxable (standard or reduced rated) or a mixture of standard, reduced, zero rated or exempt goods or services to another VAT registered business, you must provide a VAT invoice. A VAT registered customer must have a valid VAT invoice from their supplier in order to claim back the VAT on the goods or services which have been purchased.

 

Checklist: What does a VAT invoice need to include?

A VAT invoice can be in either paper or electronic form. It should include the following listed below. Use this checklist to ensure all the necessary pieces of information are included in any VAT invoice you create. Login to save this checklist to your profile for future use – as you work through the list, any checkboxes that are ticked or unticked will be automatically saved to your profile. (To register to join and enjoy the benefits of membership click on the link at the top right of the page. It will only take a few minutes to create your profile).

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How can I issue a VAT invoice?

VAT invoices can be issued in two formats:

  • Paper
  • Electronic

Both versions must include the required information as listed above. 

Electronic invoices can be issued through an online billing system or sent as an attachment by email. More businesses are opting to use electronic systems over paper as it quicker, cheaper and reduces the need for filing space.  

 

Download: Editable VAT invoice

We’ve prepared an VAT invoice Excel template for you to use. 

The template is fully editable, allowing you to customise it with your company logo and details.

Remember to keep a record of all the invoices you send out, along with details of received payments.

Click on the button below to download a copy. 

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What is a simplified invoice?

When most retail sales are made the customer cannot recover the VAT charged and the retailer is not required to provide a VAT invoice, unless the customer asks for one. Depending on the value of the goods being sold you will issue either a simplified or modified invoice. Simplified invoices contain less information than is required on a full VAT invoice.

When should I issue a simplified or modified invoice?

If the customer asks for a VAT invoice you can issue a simplified VAT invoice for goods or services priced at less than £250 including VAT or a modified VAT invoice for good or services totalling over £250 plus VAT. More information on both of these types of invoices can be found below.

£250 or less

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If the retail sale is for £250 (including VAT) or less, and there are no exempt items, a simplified invoice can be issued.

It should show:

1. The name, address and VAT registration number of the supplier

2. The tax point (time of supply)

3. A description, which is sufficient to identify the goods or services supplied

4. For each VAT rate which is applicable, the VAT rate and the total price (including VAT).

If you accept payments from your customers by card, the voucher given to the cardholder may be adapted to serve as a simplified invoice, as long as it includes the required details. You do need to keep copies of any less detailed invoices you issue.

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£250 or more

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If the retail sale is for more than £250 (including VAT), or it includes exempt items, a full invoice must be issued, unless the customer agrees to accept a modified invoice.

A modified invoice is very similar to a full invoice, except that for each item (charged at standard or reduced rate); the amount payable (including VAT) is shown. The modified invoice must show:

1. VAT-inclusive value of each standard-rated or reduced rate item

2. VAT payable on those items

3. Value of those items excluding VAT

4. Value of any zero-rated items included on the invoice

5. Value of any exempt items included on the invoice.

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When don’t I need to issue a VAT invoice?

You don’t need to issue a VAT invoice if:

  • your invoice is for only exempt or zero rated items
  • you are giving away goods as a gift
  • your customer operates a self-billing arrangement, this means:
    • an arrangement between the customer and supplier
    • the customer prepares the invoice
    • the customer sends a copy to the supplier along with the payment.

There are different rules for invoicing if you use a VAT margin scheme; further information is available at https://www.gov.uk/vat-margin-schemes/keeping-records.

Interactive tutorial: VAT invoices and discounts

Find out more about VAT invoices and discounts. This tutorial shows:

  • what an VAT invoice must show
  • simplified VAT invoices
  • the calculation of discounts and VAT.

Click on the Start button below to view. 

How do I calculate VAT on non-sterling transactions?

If you issue VAT invoices in a foreign currency or language you must:

  • show the total VAT payable in sterling on your VAT invoice if the supply takes place in the UK
  • be able to provide an English translation of any invoice within 30 days if asked to do so by a visiting VAT officer.

To convert to sterling you can: 

  • use the market selling rate at the time of supply
  • use the European Central Bank’s rate
  • use HMRC’s period rates of exchange – the rates usually stay the same for each calendar month
  • apply to HMRC to use a different method to account for the VAT

There are different rules if you use the Tour Operator’s Scheme.

For further details go to https://www.gov.uk/vat-record-keeping/vat-invoices

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