A VAT invoice is a document issued by a VAT-registered business that provides the buyer with evidence of the VAT charged on a supply of goods or services. It is the key document that enables a VAT-registered buyer to reclaim input VAT on their VAT return.
Without a valid VAT invoice, a business cannot recover the VAT it has been charged. Getting the format right is therefore essential for both the supplier issuing the invoice and the customer receiving it.
Types of VAT Invoice
HMRC recognises three types of VAT invoice, each with different content requirements depending on the value of the supply:
| Type | When to use | Value threshold |
|---|---|---|
| Full VAT invoice | Standard requirement for most B2B transactions | No upper limit |
| Simplified VAT invoice | For retail and lower-value supplies | Up to £250 (including VAT) |
| Modified VAT invoice | For retail supplies above the simplified threshold | Over £250 |
Full VAT Invoice Requirements
A full VAT invoice must contain the following information:
| Requirement | Detail |
|---|---|
| Unique invoice number | Sequential and identifying the document uniquely |
| Invoice date | The date of issue |
| Date of supply | The tax point (if different from the invoice date) |
| Supplier’s name and address | The registered name and business address |
| Supplier’s VAT registration number | The 9-digit GB VAT number |
| Customer’s name and address | The name and address of the person or business being invoiced |
| Description of goods or services | A clear description of each line item |
| Quantity of goods or extent of services | For each line item |
| Unit price | The price per item or unit excluding VAT |
| Rate of VAT | The VAT rate charged on each item (20%, 5%, or 0%) |
| Total amount excluding VAT | The net total |
| Total VAT charged | The total VAT amount |
| Total amount including VAT | The gross total |
| Rate of any cash discount | If applicable |
If the invoice includes items at different VAT rates, the net amount, VAT amount, and total must be shown separately for each rate.
Simplified VAT Invoice
A simplified VAT invoice can be issued for supplies of £250 or less (including VAT). It requires less detail:
- Supplier’s name and address
- Supplier’s VAT registration number
- Date of supply (tax point)
- Description of goods or services
- Total amount including VAT for each VAT rate
- The VAT rate applicable
A simplified invoice does not need to include the customer’s name and address, the unit price, or a separate line for the VAT amount. This makes it practical for retail and hospitality businesses.
Modified VAT Invoice
A modified VAT invoice is used by retailers for supplies over £250. It contains all the information of a full VAT invoice but shows VAT-inclusive prices rather than prices excluding VAT. This is common in shops where prices displayed to consumers already include VAT.
The Tax Point (Date of Supply)
The tax point determines which VAT period the sale falls into and therefore which VAT return it must be reported on. There are two types:
Basic Tax Point
- For goods: the date the goods are removed or made available to the customer
- For services: the date the service is completed
Actual Tax Point
The actual tax point overrides the basic tax point when:
- A VAT invoice is issued within 14 days of the basic tax point (the invoice date becomes the tax point)
- Payment is received before the basic tax point (the payment date becomes the tax point)
Getting the tax point right matters because it determines the period in which both the seller must account for output VAT and the buyer can claim input VAT.
Issuing VAT Invoices
When You Must Issue
A VAT-registered business must issue a VAT invoice when it makes a taxable supply to another VAT-registered business. The invoice must be issued within 30 days of the date of supply (or the date of payment if earlier).
When You Do Not Need to Issue
You are not required to issue a VAT invoice for:
- Supplies to non-VAT-registered customers (though you may choose to)
- Exempt supplies (e.g. insurance, finance, education)
- Supplies where the customer uses the reverse charge mechanism
Self-Billing
In some arrangements, the buyer issues the VAT invoice on behalf of the seller. This is called self-billing and requires:
- A written agreement between both parties
- The buyer to be VAT-registered
- The seller to agree not to issue their own invoice for the same supply
- Both parties to keep records of the arrangement
Self-billing is common in industries with frequent, high-volume transactions such as agriculture, construction, and waste management.
Electronic VAT Invoices
HMRC accepts electronic VAT invoices provided they contain all the required information and the customer agrees to receive them in electronic form. An e-invoice must be stored in a way that ensures its authenticity, integrity, and legibility for the entire retention period.
For more on e-invoicing formats and the Peppol network, see the guide to electronic invoicing.
Record-Keeping Requirements
All VAT invoices, whether issued or received, must be kept for a minimum of 6 years. This applies to both paper and electronic records. HMRC may request to see VAT invoices during a compliance check or VAT inspection.
Records must include:
- A copy of every VAT invoice you have issued
- Every VAT invoice you have received
- A sequential record of invoice numbers
- Any credit notes issued or received that adjust a VAT invoice
Common Mistakes
- Missing VAT registration number — The single most common reason HMRC rejects a VAT invoice
- Wrong tax point — Using the invoice date when the basic tax point is different, which misallocates the VAT to the wrong period
- Not separating VAT rates — If an invoice includes items at 20% and 5%, each rate must be shown separately with its own net and VAT totals
- Issuing a simplified invoice for over £250 — Simplified invoices are only valid for supplies up to £250 including VAT
- Accepting invalid invoices from suppliers — If a supplier’s invoice does not meet the requirements, you cannot reclaim the input VAT until a corrected invoice is obtained
- Not issuing within 30 days — Late issue does not invalidate the invoice, but it can create problems with tax point allocation and VAT return timing
VAT Invoices for Specific Situations
Deposits and Part-Payments
When a deposit is received before the goods are delivered or service completed, a VAT invoice should be issued for the deposit amount. VAT is due on the deposit at the tax point (the date of payment).
Foreign Currency
If an invoice is in a foreign currency, the VAT amount must still be expressed in pounds sterling using HMRC’s published exchange rates for the date of the tax point.
Reverse Charge Supplies
For certain supplies (e.g. construction services under the CIS reverse charge), the invoice must state that the reverse charge applies and must not show a VAT amount. The customer accounts for the VAT on their own VAT return.