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How to Create a VAT Invoice

There are many accounting software applications now that will easily prepare a VAT invoice for you and even keep a running track of your VAT liability. As with many things, it's important not to lose sight of the basics. Here we will discuss how a VAT invoice should be created and what information it must contain.

What must be included?

Only VAT registered businesses can issue VAT invoices, any VAT invoice must contain the following information:
  • A unique invoice number (usually numeric and sequential)
  • Your full business name and address
  • The invoice date
  • The invoice tax point (if different from the invoice date)
  • Customer's name and trading address
  • A description of goods or services rendered.
  • Total NET amount (excluding VAT)
  • Total VAT amount (include VAT rate applied)
  • Total Gross amount (including VAT)
  • Itemised rates and amounts of VAT where differing rates are applied

The above specification should cover the vast majority of scenarios. If however you are invoicing clients based in a different jurisdiction there may also be extra requirements so that they may comply with their own local VAT rules. Furthermore there are a number of less common invoicing scenarios (e.g. VAT Reverse Charge) where additional information may be required.

Record Keeping

Your VAT Invoices must be recorded securely with at least one physical copy or electronic backup available at all times to ensure that records are not lost in the event of fire, theft or IT failure.

Invoicing in Foreign Currencies

Any invoices issued in a currency other than GBP Sterling should display an effective exchange rate although it is not necessary to show Sterling equivalent values. You can use the market exchange rate at the time of supply, or alternative you can use HMRC's own published exchange rates or those issued by the European Central Bank (ECB).

Cancelling Invoices

When you cancel an invoice that has been issued already, you must not recycle and reuse the invoice number. This is to reduce VAT fraud and inappropriate claims. VAT numbers should ideally be numerically sequenced with a clear audit trail and no breaks in the sequence. --Latest--