Archive for the 'VAT' Category

VAT Invoices – The Essentials

All VAT registered businesses have to issue VAT invoices to go with the sale of their goods and services. Sounds fairly straightforward but if you look into the rules regarding VAT invoices then you will see that they are quite significant and care has to be taken to ensure that they are fully complied with.

1. Introduction

A VAT invoice shows certain VAT details of a sale or other supply of goods and services. It can be either in paper or electronic form.

A VAT-registered customer must have a valid VAT invoice from the supplier in order to claim back the VAT they have paid on the purchase for their business.

The following are not VAT invoices:

  • pro-forma invoices;
  • invoices that state ‘this is not a tax invoice';
  • statements;
  • delivery notes;
  • orders; and
  • letters, emails or other correspondence.

A business cannot reclaim the VAT paid on a purchase by using these documents as

proof of payment.

2. What a VAT invoice must show

A VAT invoice must show:

  • an invoice number which is unique and sequential;
  • the seller’s name or trading name, and address;
  • the seller’s VAT registration number;
  • the invoice date;
  • the time of supply (also known as tax point) if this is different from the invoice
  • date – see below;
  • the customer’s name or trading name, and address;
  • a description sufficient to identify the goods or services supplied to the
  • customer;
  • the rate of any cash discount; and
  • the total amount of VAT charged expressed in sterling.

For each different type of item listed on the invoice:

  • the unit price or rate, excluding VAT;
  • the quantity of goods or the extent of the services;
  • the rate of VAT that applies to what’s being sold; and
  • the total amount payable, excluding VAT.

If a VAT invoice is issued that includes zero-rated or exempt goods or services, it


  • show clearly that there is no VAT payable on those goods or services; and

show the total of those values separately.

So, the humble VAT invoice is actually more complicated than you might think and it is important to ensure that HMRC rules and regulations are complied with. If in doubt about the content of your VAT invoices then you should contact us, Balance Accountants, Huddersfield, for guidance. Better to get it right than end up with HMRC on your back.

End Of The Road For Paper VAT Returns

At present, only newly-registered businesses and those with turnovers of more than £100,000 have to submit their VAT online – as well as pay electronically.  Anyone else can send HMRC a paper VAT return if they wish.

But all that changes from April when the 1.9m VAT-registered traders not already required to submit online will receive a letter from HMRC in February advising them of the change and what steps they need to take.

To submit their VAT returns online, businesses  need to be registered and enrolled for HMRC’s VAT online Service.  To do this, they should go to and click “Register” under the “new user” section, then follow the instructions.  After April, HMRC will stop sending out paper returns to customers who are now required to submit online.

For details on the support available visit or phone the VAT Online Services Helpdesk on 0845 010 8500.

For those of our clients who still submit paper VAT returns but do not want to get involved in the on line filing then we may be able to help by taking on the completion of your VAT returns or even let us give you a price for doing all of your bookkeeping work thus releasing you to concentrate on more important business matters.

This article was compiled by Ashley Barrowclough on behalf of the Balance Team.

You can reclaim VAT on entertaining overseas customers once again

After a recent European case, HM Revenue & Customs have changed their mind whether input VAT can be reclaimed on entertaining overseas customers.  In 1988 UK law was changed to stop businesses reclaiming VAT on entertaining overseas customers.  In light of the recent case HM Revenue & Customs have now concluded that they need to change the law back to be consistent with European Law.

The Government intend to change the law to allow VAT to be reclaimed on entertaining overseas customers.  In the meantime HM Revenue & Customs will consider claims for past entertaining.  The welcome change only affects entertaining overseas customers.  It is still not possible to reclaim VAT for entertaining UK customers or overseas contacts who are not customers.

Extract taken from our 2011 Winter edition Tax newsletter – if you would like to subscribe please leave your details here.

Image taken from Blue Lagoon

Preparing for the increase in VAT to 20%

On 4 January 2011 the standard rate of VAT will increase from 17.5% to 20%.
Whilst this is the third time the VAT rate has changed in the last two years ,we thought we would try and clear up any confusion that it might cause by explaining the main points:

Invoices raised before 4 January 2011 for goods or services on or after that date.

If you raise invoices before 4 January 2011, for goods or services supplied on or after that date you would then be correct in using the 17.5% VAT rate (subject to below).

There are some anti avoidance rules that must be followed, if any of the following apply then you must pay the additional 2.5%:

  1. The supplier and the customer are connected parties (related individuals or companies under common control)
  2. The supplier funds, or arranges the funds for the customer’s purchase.
  3. Payment is due six months or more after the invoice date.
  4.  The amount exceeds £100,000 excluding VAT (where this is not common practice)

Sales that span the change in rate

If you provide goods or services before 4 January 2011 but raise a VAT invoice after that date you can choose to account for the VAT at 17.5% without needing to tell HMRC.

Services you start before 4 January but finished afterwards

You have a choice in this situation, you can simply account for VAT at 20% or you can split the invoice to apportion the work done on a time. The work performed before 4 January 2011 will attract VAT at 17.5%, and the rest of the work will have VAT applied at 20%. If you choose to do this you will have to be able to demonstrate that the apportionment is fair.

Continuous supplies of services

For continuous supplies of services, such as ongoing construction work, you should account for the VAT due whenever you issue a VAT invoice or receive payment, whichever is the earlier. In these cases, invoices issued or payments received on or after 4 January 2011 will be subject to 20% VAT.

Credit notes raised on or after 4 January 2011

Any credit note subsequently raised against an invoice must be based on the percentage of VAT used on the original invoice.  This may cause some software problems using computerised systems so care is needed here (always check the rate of the original invoice).

Special VAT schemes for small businesses

Cash Accounting Scheme

If you use the Cash Accounting Scheme you will need to be able to identify payments received on or after 4 January 2011 that relate to supplies made before that date. VAT at a rate of 17.5 per cent will be due on these payments.

Flat Rate Scheme

The flat rate percentages have been re-calculated to reflect a standard rate of VAT of 20 per cent. The new rates apply from 4 January 2011 until further notice.

The list of new rates can be found here.

Other things to note:

Road fuel scale charges

Many businesses reclaim input tax on the road fuel they purchase for cars and account for output tax using scale charges published by HMRC to reflect private use. New scale charge rates apply from 4 January 2011 – details are available in Appendix C of the VAT technical guide on the HMRC website here, in our library here or from the National Advice Service helpline.  

VAT fraction

The VAT fraction is used to quickly calculate the VAT element of a price that is inclusive of VAT.

The VAT fraction at 17.5% is 7/47.
Eg. If you fill your car with £50 of petrol on or before 3 January 2011 the VAT you will pay is £7.45 (£50 x 7/47)

At the new 20% rate the fraction is 1/6.
Eg. If you fill your car with £50 of petrol after 3 January 2011 the VAT you will pay is £8.33 (£50 x1/6).
This post was compiled by Richard Simpson on behalf of the Balance Team.

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