Modified VAT invoice
template

Retailers price everything including VAT, and customers think in VAT-inclusive prices, so rewriting a large sale as VAT-exclusive figures is extra work. HMRC's record keeping guidance allows a modified VAT invoice for retail sales over £250: each line shows its VAT-inclusive price, and the invoice adds the totals needed to reclaim the VAT. This template sets one out.

When to use a modified VAT invoice

Use a modified VAT invoice when you are a VAT-registered retailer, the sale is more than £250 including VAT, and a customer asks for a VAT invoice. It suits showrooms, trade counters, furniture and electrical retailers, and anyone else whose prices are displayed with VAT included. For sales of £250 or less, a simplified VAT invoice is enough; outside retail, and whenever you prefer, a full VAT invoice is always acceptable.

What a modified VAT invoice must show

HMRC's record keeping guidance (VAT Notice 700/21) describes the modified VAT invoice as showing VAT-inclusive rather than VAT-exclusive values; the totals at the foot still need to give the VAT-exclusive total and the total VAT so the customer can reclaim.

An example modified VAT invoice

The template comes filled in with example lines like these, so you can see how each part works before replacing them with your own.

Line by line: Three-seater sofa, grey (VAT-inclusive), 1 × £1,199.00 = £1,199.00; Delivery (VAT-inclusive), 1 × £60.00 = £60.00. The subtotal is £1,259.00, which is also the total including vat because no VAT is charged. The figures are illustrative; replace them with your own.

How to fill in the template

1. Add your business details, VAT number and the customer's name and address.
2. Number the invoice and enter the date of sale as the tax point.
3. List each item with its VAT-inclusive price and VAT rate.
4. Work out the total VAT with the VAT fraction (1/6 at 20%), and the total excluding VAT.
5. Show all three totals at the foot of the invoice.
6. Give the customer the invoice and keep a copy.

Number every modified VAT invoice in sequence and never reuse a number, even when a document is cancelled. Numbers make documents easy to find and to match against payments, and they show HMRC and your customers that nothing is missing. For a numbering format, try the invoice number generator.

Working out the totals

On a modified invoice, the line values include VAT, so the VAT is worked out from the total. At 20%, the VAT is one sixth of the VAT-inclusive total: a £1,259.00 sale contains £209.83 of VAT and £1,049.17 excluding VAT. At 5% the fraction is 1/21. If a sale mixes rates, work out each rate separately and show a VAT summary by rate. The VAT calculator removes VAT from any VAT-inclusive figure.

Modified, simplified or full VAT invoice?

A simplified VAT invoice covers retail sales of £250 or less. A modified invoice covers larger retail sales when you want to keep VAT-inclusive prices on each line. A full VAT invoice shows VAT-exclusive prices for each line and is acceptable in every case.

When a customer asks for a VAT invoice

Retailers do not have to give VAT invoices to every customer, but must provide one when a VAT-registered customer asks, and can be penalised for refusing. Business customers buying from a retailer, such as a company buying office furniture from a showroom, will usually ask. Having a modified invoice template ready means you can give them one on the spot, using the prices they already saw.

Exempt supplies and extended warranties

Some items sold alongside goods, such as certain insurance-backed warranties, can be exempt from VAT. Exempt items must be clearly separated on any VAT invoice and shown as carrying no VAT, with their own total. If you are unsure how an add-on is treated, check the supplier's terms and VAT Notice 700 before including it.

Keeping VAT records for retail

Retailers often account for VAT using a retail scheme, calculating output VAT from daily takings rather than invoice by invoice. Issuing a modified VAT invoice to a customer does not change the scheme you use, but keep a copy with your sales records for the day, so the sale can be traced if HMRC asks.

An example, worked through

A customer buys a sofa at £1,199 and delivery at £60, both including VAT at 20%, and asks for a VAT invoice. The two lines show £1,199.00 and £60.00 with a 20% rate. The VAT-inclusive total is £1,259.00. One sixth of that, £209.83, is the VAT, and the value excluding VAT is £1,049.17. Those three totals at the foot of the invoice are what the customer's bookkeeper needs: the net figure for their accounts and the VAT for their VAT return. Rounding the VAT to the nearest penny is fine; be consistent and round the same way on every invoice.

Delivery, installation and extras

Delivery and installation charges on a retail sale usually follow the VAT treatment of the goods they relate to, so a standard-rated sofa has standard-rated delivery. Add-ons that are separate supplies, such as an insurance-backed warranty sold by a third party, may be treated differently and should be shown on their own line with their own rate, or left off the VAT invoice if they are exempt and invoiced separately.

Returns and refunds on a modified invoice

If a customer returns goods bought on a modified VAT invoice, issue a credit note that refers to the original invoice number and date and shows the VAT-inclusive amount refunded, the VAT included in it, and the net value. The customer then reduces the VAT they reclaimed by the same amount. Keep the credit note with the original invoice, so the sale and the refund can be matched in your retail records.

Common modified VAT invoice mistakes

• Leaving out the VAT-exclusive total and VAT total. The customer needs them to reclaim, even though the lines are VAT-inclusive.
• Using it outside retail without thinking. A full VAT invoice is the standard form; the modified invoice is a retail convenience.
• Mixing rates without a summary. Show the VAT-inclusive total, VAT and net figures for each rate.

Checklist before you send it

A quick check of every modified VAT invoice before you send it:

• A sequential invoice number is on it and correct.
• Your name, address and VAT registration number is on it and correct.
• The customer's name and address is on it and correct.
• The tax point and invoice date is on it and correct.
• A description, quantity and VAT-inclusive value for each line, with its VAT rate is on it and correct.
• The total VAT-inclusive value, the total VAT, and the total value excluding VAT is on it and correct.
• A copy is saved with your records.

Sending it

Email the modified VAT invoice as a PDF with a short, specific message: the document number, the amount, and what you need the reader to do. Address it to whoever processes it, often an accounts team, and copy your usual contact if that helps. File the sent PDF with its number in the file name, so you can find it in seconds if there is ever a question.

Keep a copy

Business documents are records, and records have to be kept. Save every modified VAT invoice in one place, ideally digitally, so you can find it if a customer or HMRC asks. Making Tax Digital for Income Tax makes digital records compulsory from 6 April 2026 for qualifying income over £50,000, from April 2027 over £30,000 and from April 2028 over £20,000; check your date with the MTD requirement checker.

Download the modified VAT invoice template

Download it as a Word document, an Excel workbook or a PDF, whichever suits the way you work. The Word file opens in Google Docs too, and the Excel file in Google Sheets. The Excel totals are live formulas.

Related documents in the same family: the zero-rated invoice template, VAT-exempt invoice template, flat rate scheme invoice template, reverse charge invoice template and VAT invoice template. All of them follow the same numbering and record-keeping rules, and each page explains what that document must show.

If you would rather not manage documents by hand, a TapTax account, free to start, keeps your invoices, receipts and bank transactions together and files your Making Tax Digital quarterly updates to HMRC.