VAT invoice guide UK

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As a Value Added Tax (VAT) registered business, you’re required to issue a VAT invoice to your customers. This helps establish your VAT liability on the supply of goods and services as well as enable your VAT registered customers to reclaim the VAT charged to them. ¹

There are quite a few VAT invoice templates online that you could download and modify but if you want to take the DIY approach, we’ll share a few basic steps in this article to help you out. We’ll also show you how to save money when collecting domestic and international payments using Wise multi-currency account.

What is a VAT invoice?

A Value-Added Tax (VAT) invoice is a document issued by a VAT registered business to its customers. It sets out the details of a taxable supply and all related information as prescribed by VAT law.²

Usually VAT invoices must be issued within 30 days of the date of supply or the date of payment (if you’re paid in advance).

If your business’ VAT taxable turnover in a rolling 12-month period is more than £85,000, you’re required to register your business for VAT with HM Revenue and Customs (HMRC). Different thresholds are set for buying and selling from EU countries. The registration threshold for bringing goods into the UK from the EU is also £85,000 at the moment.³

If your VAT taxable turnover falls below £83,000, you can send a request to HM Revenue and Customs (HMRC) to cancel your registration. The registration should be cancelled within 30 days (you stop trading or making VAT taxable supplies or you join a VAT group) or you may be charged a penalty.⁴

What is a valid VAT invoice?

There are 3 types of VAT invoices that you can use: Full VAT, modified and simplified invoice. You’ll use a full VAT invoice for most transactions. You can use:¹

  • a modified invoice for retail supplies over £250

  • a simplified invoice for retail supplies under £250 - and for other supplies from 1 January 2013

  • Note: You can’t reclaim VAT using an invalid invoice, pro-forma invoice, statement or delivery note.*

What should be included in a valid invoice?

Full VAT and Modified invoice

1. A unique invoice number - every invoice should have a unique number that follows on from the last invoice to serve as the identifier. This should be placed on the top of the invoice with the date where it can be seen easily.
2. Your business name and address - The business name and address should also be visible at first glance. This information should be displayed on the top left corner as the first lines on the invoice.
3. Your VAT number - your VAT number will be generated after your registration for VAT.
4. Date - the date varies according to 'tax point' (time of supply). Dates can be when the invoice was issued, the supply was delivered or the payment was received. It's important to display both the date the invoice was issued and the tax point (time of supply) if they’re different.
5. Customer’s name and address - This information is normally displayed as “to” which comes after your company's name and address.
6. Descriptions of the goods and services - This can be presented in a 4 - column table; First column is for the description of the service, second is for the number of hours worked/quantity, third is your rate and the last one for the subtotal for each service without the VAT.
7. Total amount without VAT - This will show the total amount due without tax which will make it easier to visualise breakdown of the cost.
8. Total amount of VAT - the VAT amount in the UK is usually 20% of the total amount of the goods or services rendered.⁵
9. Rate of any discount per item - if there are discounts offered, this should be included in the description under the discounted item showing the price and and percentage/rate of discount.
10. Rate of VAT charged per item - There are 3 different VAT rates: standard, reduced and zero rate. If any of these applies to any items, it should be clearly stated on the invoice beside the item. ⁶
11. Total amount including VAT - This is the total amount to be paid - VAT included.
12. Method of payment and bank details - This is not the most important information as there are several options to receive payments. But if you have your preferred method like bank transfer, you can list down your account number and sort code for payments within the UK and a brief instruction on how to make the payment. Please note that you’d need a different account details if your customers are overseas and paying in different currencies.

To make creating your VAT invoices easier, try our VAT calculator.

Simplified Invoice

This doesn’t need to include the following:

  • Date the invoice was issued but should always have the ‘tax point’ (time of supply)
  • Customer’s name and address
  • Total amount excluding VAT
  • Total amount of VAT
  • Price per item, excluding VAT
  • Quantity of each type of item
  • Rate of any discount per item

What to include in the invoice for International trade?

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

If you're trading in the EU, learn more about European VAT rates.

Converting to sterling

Due to the mark-up that is usually around 3 - 6%, converting to sterling can be quite expensive using traditional banks. To reduce this cost, use Wise multi-currency account to receive your payments in EUR, USD, AUD, NZD and GBP for free, convert and withdraw to your local bank account in minutes using the real exchange rate and with low, transparent fee.

Wise is a groundbreaking company with over 5 million customers globally taking an innovative, fresh approach to financial services.

Wise is known for offering one of the fairest exchange rates in the business instead of inflating their exchange rates with hidden fees.

You can take advantage of the following benefits:

  • Payroll to overseas contractors
  • Payments to vendors and suppliers in over 40 currencies
  • A unique integration with Xerofor multi-currency accounting
  • Multi-currency debit card attached to the account

Create your multi-currency account, and start saving time and money today!

Sources:

  1. gov.uk article - VAT record keeping
  2. revenue.ie article
  3. gov.uk article - Vat registration
  4. gov.uk article - VAT registration thresholds
  5. legislation.gov.uk
  6. gov.uk article - vat rates

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This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.

We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.

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