If, as a VAT registered business, you either fail to issue a VAT invoice when you should, or worse still, issue an ‘unauthorised’ VAT invoice, you could be opening yourself up to financial penalties, so it is essential to know when you should and when you shouldn’t issue one. It is also important to get the information it contains right.
If you are a business registered for VAT you must issue a VAT invoice to VAT-registered customers when you sell them goods or charge them for your services.
However, VAT-registered retailers and suppliers do not need to issue them unless they are asked to do so by a customer; suppliers who do not issue one when asked to by a VAT-registered customer will receive a fine.
The penalties for issuing unauthorised VAT invoices are potentially even more serious.
Under no circumstances should you issue a VAT invoice if you are NOT registered for VAT. Auditing
Other situations too render them ‘ unauthorised’ including making a gift of the goods on which the VAT is due, selling goods using the VAT margin scheme for second-hand goods or the Tour Operators’ Margin Scheme, or using self-billing arrangements with your customer. If you are at all unsure as to whether or not you should be issuing a VAT invoice it is best to take advice from your accountant or advisor.
Once you have established that you are correctly invoicing, the next step is to ensure that it includes everything it should.
The most important thing to have clearly visible is an invoice number; the number should be unique and following on in series from the last. If for some reason you do make a mistake and have to cancel the invoice, it must be kept to produce to the VAT officer at your next inspection so that all invoices in numbered order can be accounted for.
You must show your trading name and address and your VAT registration number. It is important that this number be displayed clearly to remove all doubt that you are genuinely VAT registered.
The customer’s trading name and address needs to be included also.
The invoice must not only be dated but also carry a ‘time of supply date’ (sometimes called a ‘tax point’) if this date is different from the issue date of the invoice.