Proposals · Glossary
What is a VAT invoice?
A VAT invoice is the invoice a UK VAT registered business must give another VAT registered customer, showing the details HMRC requires so the customer can reclaim the VAT as input tax. It carries a sequential number, the tax point, both parties, a description, the VAT rate, the net amount and the total VAT in sterling.
In the UK the VAT invoice is not a style choice. HMRC sets out exactly what it must contain, and a customer who cannot reclaim VAT because a detail is missing will usually send the invoice back.
Nuwan Madhusanka · Co-founder
4 min read · Published
| Type | When it can be used | What it must show |
|---|---|---|
| Full VAT invoice | Any supply to a VAT registered customer | Sequential number, tax point, issue date, your name, address and VAT number, customer name and address, description, quantity, rate, net amount per line, total net, total VAT in sterling, unit price, any cash discount rate |
| Simplified VAT invoice | Supplies of £250 or less, and the customer agrees | Your name, address and VAT number, tax point, description, and for each rate the total including VAT and the VAT rate |
| Retailer's card voucher | Card sales where a retail customer asks for a VAT invoice | Your name and address, the charge including VAT, the date of sale, plus the other simplified invoice details |
Who has to issue one
A UK business registered for VAT must issue a VAT invoice when it makes a standard or reduced rate supply to another VAT registered business, because that invoice is the customer's evidence for reclaiming input tax. You do not have to issue one for zero rated supplies or to customers who are not registered, although in practice most businesses give one to any business customer who asks, since HMRC does not expect you to check registration first.
The 30 day rule
HMRC's guidance says a VAT invoice should normally be issued within 30 days of the tax point, which is usually the date the goods were supplied or the service performed. An invoice issued under that rule does not itself create a new tax point. Longer delays need HMRC's agreement except in a few listed cases, such as waiting for your own suppliers' invoices.
A worked line
Take the joinery job in the prompt. Materials of £1,450, labour of 16 hours at £45, which is £720, and delivery of £60 come to £2,230 net. VAT at 20 percent adds £446, for a total of £2,676. The invoice shows each line's net amount and rate, the £2,230 net total and the £446 of VAT in sterling. Working backwards from a VAT inclusive price uses the VAT fraction, one sixth at 20 percent, so £2,676 divided by six gives the same £446.
Common mistakes
Numbers that are not in sequence or that restart each year without a series prefix. A trading name with no registered name and address anywhere on the document. Showing VAT in euros or dollars on a foreign currency invoice without converting the VAT total into sterling. Leaving off the tax point when it differs from the issue date. And using a simplified invoice for a supply over £250, which the customer cannot use to reclaim.
Where it shows up in the product
When a proposal or invoice is priced in pounds, the proposals module labels the tax line VAT, as it does for euros; Australian and New Zealand dollars get GST and other currencies get Tax. Each line can carry its own tax rate, the pricing table shows Item, Qty, Unit price, Tax, Discount and Amount, and invoices are numbered in the INV-0001 style. Check that your registered name, address and VAT number appear on the invoice before you send it.
Questions people ask
Does a VAT invoice need the customer's VAT number?
A full UK VAT invoice must show the customer's name and address, but not their VAT number, for supplies within the UK. The customer's number becomes relevant for certain cross border supplies, such as goods moved between Northern Ireland and the EU, where the invoice has extra requirements. HMRC VAT Notice 700 sets out those cases.
Can a VAT invoice be in a foreign currency?
Yes, the prices can be in any currency, but the total VAT must be shown in sterling, converted using one of the methods HMRC allows. Many businesses that invoice in euros or dollars add a single line converting the VAT total into pounds, which is enough to meet the requirement without converting every line.
Is a receipt the same as a VAT invoice?
Not usually. A till receipt shows that payment was made but often lacks the details a VAT invoice needs. A retailer can give a simplified VAT invoice for sales of £250 or less, and card vouchers can be adapted to serve, but a business customer who needs to reclaim VAT on a larger purchase should ask for a full VAT invoice.
What if I am not VAT registered?
Then you must not issue a VAT invoice or show VAT on your invoices. You issue an ordinary invoice with your business details, the customer, a description and the amount. Charging VAT without being registered is an offence, and the customer could not reclaim it anyway, because only a registered supplier's VAT invoice supports a claim.
How long must VAT invoices be kept?
HMRC's record keeping guidance, VAT Notice 700/21, generally requires VAT records, including copies of the invoices you issue and receive, to be kept for six years. Records can be kept digitally, and businesses within Making Tax Digital keep certain records in compatible software.
Can a VAT invoice be sent by email as a PDF?
Yes. HMRC accepts electronic VAT invoices, including PDFs sent by email, as long as they contain all the required details and the customer agrees to receive them that way. Keep a copy in a form you can produce if HMRC asks, because the issuer needs the same record the customer relies on.
Make one with proposals
The button opens the generator with this use case already described. Change the wording to match your own.
Create a proposal with OneCraftRelated questions
- What is an itemised invoice?What is an itemised invoice: each item listed with quantity, unit price, GST and amount, what Australian tax invoices must show, and a worked example.
- What is an invoice number?What is an invoice number: the unique reference on every invoice, the numbering formats that work, and what the ATO and HMRC expect it to do for your records.
- What is a commercial invoice?What is a commercial invoice: the document customs uses to value and clear exported goods, what it must show, and how it differs from proforma and tax invoices.
- Invoice vs receipt: the request and the proofInvoice vs receipt: an invoice asks for payment, a receipt proves payment was made. When to issue each, what each must show in Australia, and how they link.
Step by step in the builder: Send a proposal and get paid, then Set invoice reminders.
Written and checked by the OneCraft team. Last checked .