Pro-forma invoices If you need to issue a sales document for goods or services you haven't supplied yet, you can issue a 'pro-forma' invoice or a similar document to offer goods or services to customers. A pro-forma invoice is not a VAT invoice, and you should clearly mark them with the words 'This is not a VAT invoice'. If your potential customer accepts the goods or services you're offering them and if you actually supply them, then you'll need to issue a VAT invoice within the appropriate time limit - see the section in this guide on time limits for issuing invoices. If you've been issued with a pro-forma invoice by your supplier, you can't use that to claim back VAT on the purchase. You must obtain a VAT invoice from your supplier. Top Where simplified or modified VAT invoices can be issued
Simplified VAT invoices
If you make retail sales and you make a sale of goods or services for £250 or less including VAT, then when a customer asks for a VAT invoice, you can issue a simplified VAT invoice that only needs to show: the seller's name and address the seller's VAT registration number the time of supply (tax point) a description of the goods or services Also, if the supply includes items at different VAT rates then for each different VAT rate, your simplified VAT invoice must also show: the total price including VAT the VAT rate applicable to the item. If you accept credit cards, then you can create a less detailed invoice by adapting the sales voucher you give the cardholder when you make the sale. It must show the information described in the six bullets above You do need to keep copies of any less detailed invoices you issue.
Modified VAT invoices
If you sell goods or services for more than £250 including VAT, and your customer agrees, you may issue a modified VAT invoice showing the VAT-inclusive value of each standard-rated or reduced rate item. The modified VAT invoice must show separately the total: VAT-inclusive value of each standard-rated or reduced rate item VAT payable on those items value of those items excluding VAT value of any zero-rated items included on the invoice value of any exempt items included on the invoice The modified invoice must otherwise show the details required on a full VAT invoice. If you are unable to offer either a simplified or modified invoice, you must issue a full VAT invoice. Get information about calculating VAT for VAT-inclusive amounts
Electronic VAT invoicing You can issue, receive and store your VAT invoices in electronic format. You don't need to tell HMRC if you plan to issue, receive and/or store invoices electronically. Electronic invoices must contain the same information as paper invoices. Find out more about issuing, receiving and storing VAT invoices electronically
VAT invoices when trading internationally
You may issue VAT invoices (paper or electronic) to your customers in a foreign currency and/or in a foreign language if you want to. However, 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
Time limits for issuing VAT invoices
There is a strict time limit on issuing VAT invoices. You must normally issue a VAT invoice (to a VAT-registered customer) within 30 days of the date you supply the goods or services - or if you were paid in advance, the date you received payment. This is so your customer can claim back the VAT on the supply, if they're entitled to. You can't issue invoices any later without permission from HMRC except in a few limited circumstances. For goods, the time when the goods are considered to be supplied is the date when one of these happens: you send the goods to the customer the customer collects the goods from you the goods (which are not either sent or collected) are made available for the customer to use - for example, if you are assembling something on the customer's premises For services, the date when the services are considered to be supplied is the date when the service is carried out and all the work - except invoicing - is finished. Find more information on time limits for issuing VAT invoices
You need a valid VAT invoice to reclaim VAT
Even if you are registered for VAT, you can normally only reclaim VAT on your purchases if: you buy an item and use it for business purposes you have a valid VAT invoice for the purchase Only VAT-registered businesses can issue valid VAT invoices. You cannot reclaim VAT on any goods or services that you buy from a business that is not VAT registered.
The VAT Return
What not to include in the VAT boxes 6 and 7
(in Kashflow its n/a on the vat drop down list)
- VAT itself
- wages and salaries
- PAYE and National Insurance contributions
- money put into and taken out of the business by you
- loans, dividends, and gifts of money
- insurance claims, Insurance premiums
- Stock Exchange dealings (unless you are a financial institution)
- MOT certificates
- Motor vehicle licence duty
- Local Authority rates and
- Income which is outside the scope of VAT because it is not consideration for a supply
- Bank charges, service charges for hire purchase set up, Loans etc.
- Postage stamps, Royal mail services.
- total sales/outputs excluding any VAT. Include:
- standard-rated supplies including road fuel scale charges (see Notice 700/64 Motoring expenses)
- supplies to VAT registered traders in EC Member States; supplies to non-VAT registered or private individuals in EC Member States (distance sales)
- zero-rated supplies, including export supplies
- exempt supplies
- any other business income
- “reverse charge” transactions
- purchases under the special accounting scheme for gold
- supplies which are outside the scope of UK VAT under the Notice 741 Place of supply of services
- deposits for which an invoice had been issued
- own goods transferred to other EC Member States and
- supplies to customers in EC Member States on a sale or return basis
- supplies and purchases from non registered vat businesses, if that purchase would have normally been nil or standard rated vat.
Exempt goods and services
There are some goods and services that are exempt from VAT. Exempt goods and services are not taxable for VAT, so if you supply them, then:
- you don't charge any VAT on them
- you don't include them in your VAT accounts (This means do not include them in box 7 )
- you can't normally claim back the VAT on related purchases
Goods and services that are exempt from VAT include:
- insurance (but there is an Insurance Premium Tax (IPT) that may apply instead - not reclaimable)
- some services from doctors and dentists
- some types of education and training
If you sell or otherwise supply only exempt goods or services, you cannot register for VAT and you cannot charge VAT. If you buy exempt goods or services, you aren't charged VAT so there is none to claim back.
If you sell some exempt goods or services and some goods or services that are taxable for VAT, your business is 'partly exempt' and you will only be able to reclaim VAT related to the VAT taxable goods and services you sell.
The following Financial services and investment charges or payments appearing on a bank statement are exempt for VAT– so do not include them in box 7 on the vat return.
The operation of a current, deposit or savings account-exempt-VAT Notice 701/49
Financial services including the issue, transfer or receipt of, or dealing with money, securities for money or orders for the payment of money- exempt-VAT Notice 701/49
The granting of credit such as loans-exempt-VAT Notice 701/49
The management of credit by the person who has granted it-exempt-VAT Notice 701/49
The provision of the facility of installment of credit finance for example hire-purchase-exempt-VAT Notice 701/49
The provision of qualifying financial intermediary services-exempt-VAT Notice 701/49
The issue, transfer or dealing with a security, including shares and bonds-exempt-VAT Notice 701/49
The management of a qualifying special investment fund-exempt-VAT Notice 701/49
Financial service supplied as a separate element but with other goods or services-exempt-VAT Notice 701/49