What is a VAT Invoice? A Comprehensive Guide

Not all businesses are allowed to issue VAT invoices because not all businesses are VAT-registered. This statement means that to issue a VAT invoice your business has to be VAT registered as well as it becomes compulsory with the condition when a customer is a VAT registered.

In simple words, we can say that a VAT invoice is a special kind of invoice that is suggested to be issued when a specific sale is up for VAT tax.

 

Moreover, this is important to know that if your business is not VAT registered, you can simply not charge sales tax and you can only issue the standard type of invoices. Further in this article, we will discuss:

• The Requirements of VAT Invoices
• Modified VAT Invoices and Simplified VAT Invoices
• VAT Invoices Record Keeping

The Requirements of VAT Invoices:

There are certain requirements to make VAT invoices legal, compliant and complete. According to HMRC, the requirements include the following:

• Sequential invoice number which should be unique
• The business name
• The registered office address
• VAT number
• Amount of VAT in total
• Discounts that were applied to items
• The item quantity
• The due amount
• VAT rate that was charged on every item
• Price of every item without including VAT
• Services and product description
• The date on which the supply was sent
• The name and address details of your customer

Modified VAT Invoices and Simplified VAT Invoice:

When you have to issue VAT invoices, the requirement is that you have to issue full VAT invoices.

Usually, retailers are subject to issuing simplified and modified invoices. This is because retailers are the individuals who are directly in selling and dealing with the consumers and normally it is not necessary to issue the invoices at this point. However, sometimes the customers ask for the invoice and the retailer can provide a modified or simplified invoice.

Modified VAT Invoice:

If the limit of sale reaches £250 or more than that then the retailer can issue modified VAT invoices. However, it is a must that the requirements explained by HMRC must be considered and met seriously. If we talk about the major factor that makes a full VAT invoice and a modified different, this would not be wrong to say that the total amount due including VAT and tax due amount are the prominent factors in this regard.

Simplified VAT Invoice:

Just on the contrary if the value of your invoice goes lower than £250, the retailer is bound to issue a simplified VAT invoice rather full VAT invoice regardless of whether it is a retailer business or any other company. These kinds of invoices do not need the date and other details of the customer, neither is required in the simplified VAT invoice to add price details, unlike the full VAT invoice.

It primarily needs a display of the VAT that is being charged and the total amount after including VAT.

VAT Invoices Record Keeping:

If you carry out a business that is VAT registered, it is one of the basic requirements that you maintain a record of your VAT invoices and the minimum period for the record is six years. You can come to a point where HMRC might require and ask you to provide the records for the sake of checking that you have been charging the right amount of VAT.

Ensure that the records are maintained in such a manner that is easy to read, complete and accurate as well.

The Bottom Line:

Now that you have developed a better understanding of  VAT invoice, we can sum up the discussion by saying that it only becomes a must if you carry out a business that is VAT-registered. Other businesses are good to go with simplified and modified VAT invoices.

 

Disclaimer: This article intends to provide general information based on VAT invoice