What Is a VAT Invoice?
VAT Invoice

Every VAT-registered business deals in VAT invoices twice over: it issues them to its customers and collects them from its suppliers. A VAT invoice is more than an invoice with VAT added. It is the document VAT law treats as evidence, both of the VAT the supplier must pay to HMRC and of the VAT the customer is entitled to reclaim. If a detail is missing, the customer may not be able to reclaim, and the supplier's records may not stand up to an HMRC check.

When you must issue one

VAT Notice 700 is direct: whenever you supply standard-rated or reduced-rated goods or services to another VAT-registered person, you must give that person a VAT invoice. In practice, many businesses issue VAT invoices to any customer who asks, as they usually cannot tell whether a customer is registered. The exceptions include self-billing arrangements, where the customer raises the invoice, and authenticated receipts used in some construction contracts.

You should normally issue the VAT invoice within 30 days of the tax point, the time of supply. That limit can be extended without applying to HMRC in some cases, for example when you are waiting for invoices from your own suppliers or subcontractors.

What a VAT invoice must show

If you trade under a business name, you can issue invoices in that name, but VAT Notice 700 says the name and address under which you are registered for VAT must appear somewhere on the document.

Full, simplified and retailer's VAT invoices

Zero-rated and exempt items

If a VAT invoice includes zero-rated or exempt items alongside standard or reduced-rated ones, VAT Notice 700 says those items must show clearly that no VAT is payable, with a separate total for their values. An invoice for zero-rated supplies alone is not a VAT invoice, though it still records a taxable supply.

VAT invoices in a foreign currency

You can price a VAT invoice in any currency, but the total VAT must be expressed in sterling, converted at the UK market selling rate at the time of supply or at HMRC's period rate if you have adopted it. The guide on invoicing in a foreign currency explains both bases.

Rounding

VAT Notice 700 lets you round the total VAT on a VAT invoice down to the nearest whole penny, ignoring any fraction. If you calculate VAT line by line, you can round each line down to the nearest 0.1p, or to the nearest 1p or 0.5p, as long as you are consistent. The VAT calculator rounds to the nearest penny.

Why your customer needs it

A VAT-registered customer reclaims VAT on its purchases as input tax, and a valid VAT invoice is the evidence it needs. Without one, or with one missing required details, the reclaim may be refused. That is why accounts teams often reject invoices that lack a VAT number or a tax point, and why a proforma, a statement or a quote, however detailed, cannot be used instead.

Correcting a VAT invoice

Once issued, a VAT invoice is not edited. If it is wrong, issue a credit note that meets the VAT rules, and a replacement invoice with a new number if needed. The guide on how to correct an invoice walks through each case.

The tax point

The tax point, or time of supply, fixes which VAT return a sale belongs to, and it is one of the details a VAT invoice must show. The basic tax point is usually when goods are supplied or services completed. But if you issue a VAT invoice or receive payment before that, the earlier date becomes the tax point for the amount invoiced or paid. And if you issue the VAT invoice within 14 days after the basic tax point, the invoice date normally becomes the tax point instead. Construction contracts with stage payments and retentions have their own rules, set out in VAT Notice 708; see retention payments in construction.

A worked example

A VAT-registered joiner fits shelves for a café on 12 May and issues INV-0207 on 14 May: supply and fit three oak shelves, 3 at £130, 20% VAT, £390 net, £78 VAT, £468 total, the joiner's VAT number and registered name and address, the café's name and address. The basic tax point was 12 May, when the work was completed, but because the invoice was issued within 14 days of it, the invoice date, 14 May, becomes the tax point, and the invoice shows it. The café reclaims £78 as input tax using INV-0207, and the joiner includes the £78 as output tax in the VAT return covering 14 May.

VAT invoices under the domestic reverse charge

For construction services under the domestic reverse charge, the supplier still issues a VAT invoice with every required detail, but states the VAT due under the reverse charge without charging it, and adds the reference "reverse charge". See reverse charge invoice wording.

Issuing VAT invoices when you first register

When you register for VAT, you must start issuing VAT invoices from your effective date of registration. While you wait for your VAT number, you cannot show VAT on invoices; you can raise your prices to cover the VAT, then reissue those invoices as VAT invoices once the number arrives, so VAT-registered customers can reclaim. Update your invoice template with your VAT number, registered name and address, and a VAT line for each rate before your first VAT invoice goes out. The invoice number generator helps you keep one unbroken sequence across the change.

Common mistakes

• Missing VAT number or tax point. The customer may be unable to reclaim.
• VAT not shown in sterling on a foreign currency invoice.
• Charging VAT while not registered. Only registered businesses can issue VAT invoices.
• Issuing late. Normally within 30 days of the tax point.
• Editing instead of crediting. Use a credit note and a new invoice.
• Mixing zero-rated and standard-rated items without separate totals.

VAT invoices from April 2029

The government has announced that every VAT invoice must be issued as an e-invoice from April 2029, with a roadmap due at Budget 2026. The legal content of a VAT invoice will still matter, but it will travel as structured data rather than a PDF. The e-invoicing hub explains what is known so far, and e-invoicing defines the term.

Checking the VAT invoices you receive

When a supplier sends you a VAT invoice, check it before you reclaim: the supplier's VAT number is present and in the right format, the tax point is shown, the VAT rate is right for what you bought, the arithmetic works, and the invoice is addressed to your business. If anything is missing, ask for a corrected invoice before you reclaim the VAT. A valid-looking VAT number can be checked through HMRC's online VAT number checking service. Keeping a clean set of valid VAT invoices is the simplest protection against a reclaim being refused on an HMRC check.

Keeping VAT invoices

Keep the VAT invoices you issue and receive for at least 6 years, as VAT Notice 700/21 generally requires. They support your VAT returns, and your customers' reclaims depend on the ones you send.

Related terms

For the full invoice checklist, see what a UK invoice must include. For whether VAT belongs on your invoice at all, see do I charge VAT on my invoice. For the shorter version, see simplified VAT invoice, and for the advance bill that is never a VAT invoice, see proforma invoice.