VAT invoices and tax point dates
A useful summary for UK VAT registered businesses
We regularly see VAT registered businesses struggling with their compliance obligations when it comes to meeting VAT invoice requirements. These often overlap with tax point determination and together the two issues can make completing VAT returns difficult.
The summary below provides useful information on the UK rules for VAT invoices and tax points. It is aimed at helping you avoid common mistake such as:
- declaring output tax in the wrong VAT return period
- not having adequate records as per the VAT rules to support recovery of VAT costs
- being questioned by customers as to whether the invoices you issue are valid.
What is a VAT invoice?
Businesses can sometimes struggle to differentiate between a VAT invoice and the standard invoice document they issue to customers. This is the case both when issuing them in respect of sales made and gathering evidence to support VAT recovery in their VAT return.
When it comes to reclaiming VAT incurred on costs, it is very common for businesses to use documents entitled “pro-forma invoice”, “order acknowledgment” and “statements” amongst others to support their position. However, these will not count to support VAT recovery unless they meet all the conditions needed to be a valid VAT invoice.
It is also a legal requirement for UK VAT registered businesses to issue a VAT invoice when they supply goods or services subject to a positive rate of UK VAT to another VAT registered business. However many businesses, often unknowingly, issue invalid invoices that lead to a range of problems that include penalty consequences from HMRC and disputes with customers.
Requirements to be a VAT invoice
When it comes to preparing a VAT invoice, it must contain a certain number of information points to be a valid document. There are no restrictions on the medium that is used to issue the VAT invoice, both paper and electronic versions are accepted by HMRC for record keeping purposes. In recent years, businesses have been focusing on digitalisation and as a result we see many opting for electronic invoicing over paper. Unlike many other countries, there is currently no expectation in the UK that e-invoicing will be adopted.
Regardless of the issuing medium, VAT invoices must be retained as a piece of primary record keeping plus have all the information as listed below:
| Requirements | Full invoice | Simplified invoice |
| Invoice number | Yes | Yes |
| Invoice date | Yes | No |
| Tax point date or time of supply | Yes | Yes |
| Supplier's name and address | Yes | Yes |
| Supplier's VAT registration number | Yes | Yes |
| Customer's name and address | Yes | No |
| Description of good and services | Yes | Yes |
| Unit price of goods and services (excluding VAT) | Yes | No |
| VAT rate applicable to each of goods and services | Yes | Yes |
| Total amount payable excluding VAT | Yes | No |
| Total VAT payable in GBP (Foreign currency must be converted) | Yes | No |
| Total amount including VAT | No | Yes |
| Rate of any discount per item | Yes | No |
We’ve referenced two different types of invoices in our list, a “full invoice” which is the standard VAT invoice which must be issued to other VAT registered businesses and also a "simplified invoice”. This second document can be issued when the total amount due for a supply is under £250 and hence less details are demanded. Retail businesses often use this type of invoice when selling directly to public, as they do not have to issue a full VAT invoice to non-VAT registered customers, but this will suffice to help the customer with VAT recovery.
In some instances modified or summary invoices can be issued, but these are rare. Businesses in Northern Ireland must also include customer details such as VAT registration numbers when supplying goods to EU member states.
Tax point date and time of supply
Tax points help determine the date upon when VAT becomes due. They are fundamental rules which VAT registered business must follow when paying or reclaiming VAT in their VAT return. It is also important that businesses understand the tax point rules when they issue their VAT invoices as it does need to be shown on that document.
Tax point rules
- A basic tax point is generally deemed to be created at the time a good is delivered (i.e. ownership changes) or for a service, it is completed.
- This basic tax point can be overridden though by the creation of an actual tax point. This happens when a VAT invoice is issued, or payment received before the basic tax point is created or a VAT invoice is issued within 14 days of a basic tax point.
- For continuous supplies (i.e. management services, long term loans, utilities, etc) a tax point will be created every time a VAT invoice is issued, or payment received.
For many businesses, most of the time the tax point date will be the same as that when a VAT invoice is issued. Regardless though it should be shown separately on a VAT invoice or be noted that a single date is relevant for both points.
Businesses do need to understand the tax point rules because they determine in which VAT return amounts of VAT should go. If this is not correctly allocated then returns will be wrong and we do see HMRC challenge this, particularly where VAT on sales is declared at a date later than it should have been.
In summary
VAT registered businesses must follow the rules below when it comes to a tax point date and time of supply.
| Conditions - VAT invoice issued? | Tax point date |
| Not issued yet | Date of supply |
| Yes issued within 14 days of the supply | Date of invoice |
| Yes but 14 days after the supply | Date of supply |
| Not yet, but payment received in advance of the supply | Date of payment received |
| Yes, before supply has been started | Date of invoice issued |
How we can help
Our VAT and Customs team have experience across a broad range of industry sectors helping with both VAT advisory and compliance services to assist with your VAT issues. Meeting VAT compliance obligations can be complex and businesses often need additional support to avoid making mistakes. We’d be happy to discuss any matter you wish to share, whether that’s how to file a return through to checking the whole compliance management process.
If you would like to discuss this further, please get in touch with Rob Janering, or your usual Crowe contact.
