When you need a VAT invoice
Only VAT-registered businesses can issue VAT invoices. If you’re registered, you must issue one whenever you supply goods or services at the standard or reduced rate to another VAT-registered business, normally within 30 days of the supply (Notice 700/21, section 3.1).
You don’t always have to issue one, for example if your invoice is only for zero-rated or exempt sales within the UK, or your customer runs a self-billing arrangement (Notice 700/21, section 4.6). Sales to people who aren’t VAT registered don’t need a VAT invoice either, though many businesses use the same invoice for everyone.
Full VAT invoices
A full VAT invoice is the standard kind. It must show a sequential number, the time of supply, the date of issue, your name, address and VAT number, your customer’s name and address, and a description of what you supplied. For each item it shows the quantity, the unit price, the rate of VAT and the amount before VAT. It ends with the total before VAT, the rate of any cash discount, and the total VAT in pounds sterling (Notice 700/21, section 4.1).
The time of supply, or tax point, is usually the date you deliver the goods or finish the work. If you issue the VAT invoice within 14 days after that, the invoice date normally becomes the tax point instead (Notice 700, section 14.2). Our guide to what an invoice must include has the full list, with the extra details for sole traders and companies.
Simplified and modified invoices
If a sale is £250 or less including VAT, you can issue a simplified invoice. It shows less (Notice 700/21, sections 4.4 and 4.5):
- your name, address and VAT number
- the time of supply
- a description of what you supplied
- for each VAT rate, the total including VAT and the rate charged
Exempt items can’t go on a simplified invoice. For a sale over £250, you must issue a full VAT invoice or a modified one. A modified invoice is a full VAT invoice that shows amounts including VAT rather than before VAT. Retailers use these most.
Reverse charge invoices for building work
Under the domestic reverse charge for building and construction services, your customer pays the VAT to HMRC instead of paying it to you. You still issue a VAT invoice, but it works differently (VATREVCON37100):
- it must say that the reverse charge applies, for example “Reverse charge: customer to pay the VAT to HMRC”
- it should state the amount of VAT the customer must account for
- that amount must not be included in the total VAT charged
So the total you ask your customer to pay is the amount before VAT. HMRC also accepts the wording “reverse charge: VAT Act 1994 Section 55A applies” or “reverse charge: S55A VATA 94 applies”.
The reverse charge applies only to certain building and construction services between VAT-registered businesses that report under the Construction Industry Scheme, and not to sales to the end user. If you’re not sure whether it applies to you, check HMRC’s guidance or ask an accountant before you invoice.
Working out the VAT
HMRC lets businesses that issue invoices round down the total VAT on an invoice to the whole penny, ignoring any fraction of a penny (Notice 700, paragraph 17.5). Retailers have different rules. Our invoice generator works out the VAT for each rate on the total of the lines at that rate, then rounds it down to the penny. So 3 items at £13.33 come to £39.99, and the VAT at 20% is £7.99, not £8.00.