What Is a Commercial Invoice?
Commercial Invoice

When goods leave the UK, they carry paperwork that people who have never met you will rely on: customs officers, carriers, customs agents and the buyer's import broker. The commercial invoice is the core of that paperwork. It says what the goods are, how many there are, what they are worth, where they were made and on what terms they are sold. Get it right and goods move; get it wrong and they wait at the border, sometimes for days, while your buyer waits too.

What a commercial invoice typically shows

Exact requirements depend on the destination country and the goods, so check what the buyer and their customs agent need before shipping. GOV.UK's export guidance advises asking the buyer what information they need you to provide.

Commercial invoice, proforma and sales invoice

Commercial invoices and VAT

Exports of goods from the UK are generally zero rated, but only if the conditions in VAT Notice 703 are met. The exporter must export the goods within the time limits, and obtain and keep evidence of supply and evidence of export. VAT Notice 703 lists what can count as evidence of supply, including the customer's order, the sales contract, the export sales invoice, the packing list, insurance and freight documents and evidence of payment. The commercial invoice is therefore part of the VAT case as well as the customs one. If the evidence is missing or unsatisfactory, the supplier becomes liable for the VAT at the UK rate.

The descriptions must also be consistent. HMRC requires an accurate and non-contradictory description of the goods and quantities, and an inaccurate description on an export declaration can bring a customs penalty.

Currency and exchange rates

Commercial invoices are often in the buyer's currency. For your own records, and for your VAT return, values must be converted to sterling. VAT Notice 700 allows the UK market selling rate at the time of supply or HMRC's published period rate, if you adopt it. The guide on invoicing in a foreign currency covers both.

Why accuracy matters so much

Customs authorities use the commercial invoice to classify the goods, check any licensing rules and calculate duties and import taxes in the destination country. A vague description, a wrong commodity code or a value that does not match the payment can hold goods at the border, trigger checks or result in the wrong duty being charged. On the UK side, HMRC compares your records, including the commercial invoice, with the export declaration when it checks whether a zero-rated export was genuine.

Delivery terms in brief

Delivery terms, usually written as a three-letter Incoterms rule followed by a place, say who arranges and pays for each part of the journey and who bears the risk along the way. Under some terms the seller hands the goods over at its own premises and the buyer does everything else; under others the seller delivers all the way to the buyer's door, sometimes including import duties. The terms affect the price you quote, who makes which customs declarations, and, for VAT, whether you are making a direct export, where you arrange the transport, or an indirect export, where the buyer does. Put the agreed terms on the commercial invoice so everyone handling the goods knows who is responsible.

Goods, not services

Commercial invoices are for goods. Services supplied to customers abroad do not cross a border physically, so there is no customs process for them, and the VAT rules are different: many services to overseas business customers are outside the scope of UK VAT under the place of supply rules. A business selling both, such as equipment with installation abroad, needs to treat the two parts according to their own rules, and should take advice where the split is unclear.

Northern Ireland

Goods moving between Northern Ireland and the EU, and between Great Britain and Northern Ireland, follow their own arrangements, which differ from exports from Great Britain to the rest of the world. If you send goods to or from Northern Ireland, check the GOV.UK guidance for that route before relying on the general export rules described here.

Getting ready to export

GOV.UK's step-by-step export guidance covers the essentials: getting an EORI number, checking whether the buyer can import the goods, deciding who will make the export declarations and transport the goods, and keeping the records. Many small exporters use a customs agent or freight forwarder to handle declarations; they will tell you exactly what they need on the commercial invoice. Agree delivery terms with the buyer early, because they decide who pays for transport, insurance and import charges, and they belong on the invoice.

A worked example

A UK pottery, VAT registered, sells 240 mugs to a French shop for €2,280, delivered to Lyon. It issues commercial invoice EXP-0034 with both parties' details, its EORI number, a precise description, the commodity code, UK origin, quantities, unit and total prices in euros, the delivery terms, weights and packages. No UK VAT is charged, because the export is zero rated. The pottery's courier makes the export declaration and returns proof that the goods left the UK. Within three months, the pottery holds the order, EXP-0034, the packing list, the courier's export evidence and the payment record: evidence of supply and of export, filed together. It records the sale in sterling at the rate on the day of supply.

Returns, repairs and goods sent on approval

Not every shipment is a sale. Goods sent back for repair, returned faulty goods, samples and goods sent on approval still cross the border and still need paperwork describing them. The invoice or accompanying document should say plainly why the goods are moving and what they are worth, and whether any charge is being made. The customs treatment, including whether duty or import VAT applies at the other end, depends on the reason, so tell your carrier or customs agent the real reason rather than describing everything as a sale or a gift.

Getting paid on export sales

Cross-border payments take longer and cost more to chase, so agree terms carefully. For a new overseas buyer, payment in advance against a proforma is common. Established buyers may pay on 30-day terms. Put your international bank details on the commercial invoice, say who pays transfer charges, and ask for the invoice number as the payment reference. The guide on invoice payment terms covers the options.

Records to keep

GOV.UK is direct: you must keep commercial invoices and any customs paperwork. If you are VAT registered, record the goods in your VAT accounts even though they are zero rated. Keep the evidence of supply and of export together for each shipment, for at least as long as your VAT records, which is generally 6 years; see how long to keep invoices. For whether UK VAT applies to other sales, see do I charge VAT on my invoice.

Common mistakes

• Vague descriptions, such as "samples" or "parts", which customs cannot classify.
• Values that differ between the invoice, the declaration and the payment.
• Missing origin or commodity codes where the destination requires them.
• Zero-rating without evidence of export. The VAT then becomes due at the UK rate.
• Assuming the proforma is enough. The commercial invoice for the actual shipment is the document customs relies on.
• Missing the three-month limits. Without evidence of export in time, the sale must be treated as a UK sale with VAT.

Related terms

A commercial invoice often follows a proforma invoice and travels with a delivery note. For UK sales that carry VAT, the invoice must meet the rules for a VAT invoice. The VAT calculator works out VAT on UK sales, and the guide on invoicing in a foreign currency covers the sterling rules for VAT amounts.

The short version

Describe the goods precisely, value them accurately, state their origin, commodity code and delivery terms, keep every figure consistent with the export declaration and the payment, and file the invoice with your evidence of export within three months. Do that for every shipment and the goods move smoothly, the buyer's import goes through, and your zero-rated export stands up if HMRC ever checks it.