In the UK, there are 3 different types of VAT invoices you can send to your clients: full invoices, simplified invoices, and modified invoices. Each type has a specific purpose and is used in different circumstances. We will explain each of them in detail below.
If you are a VAT registered business in the UK, you will need to understand how to issue invoices inclusive of VAT.
What is a full VAT invoice?
A full invoice is the standard form of invoice used when the sale is subject to VAT. If you are a VAT registered business that sells taxable products or services, you will need to issue a VAT invoice. A full invoice is the most common form, so when in doubt, use this format.
A full invoice must include the following details to be legal:
- Invoice number
- Your business name and address
- Your customers name and address
- The invoice date and date of supply
- Your company’s VAT number
- A description of the products being sold
- The price of each product (exclusive of VAT)
- The VAT rate of each product
- The quantity of each product
- The total amount of the invoice (exclusive of VAT)
- The total amount of VAT
You are required to issue a VAT invoice if any of the products being sold are subject to VAT, but if all of the products are zero-rated, a VAT invoice is not required.
What is a simplified VAT invoice?
A simplified invoice is exactly what it says: simplified. It includes less information than normal, and, rather than spelling out the total amount due without VAT and how much VAT has been added, it simply tells the customer how much is due, VAT included.
A simplified invoice includes the same information as a full invoice, excluding the date, the customer’s details, subtotal, total VAT amount, and the price and quantity of each item. It is a very basic invoice version to show the total amount to be paid by the customer.
Simplified invoices can only be issued for purchases up to the limit of £250. If a customer asks for a VAT invoice for sales over this amount, a modified or full invoice must be issued instead.
What is a modified VAT invoice?
A modified invoice is similar to a full invoice, but it also includes the VAT inclusive price of products and the total amount including VAT.
Modified invoices are only issued to sales exceeding £250 that include taxable product. This type of VAT invoice must be agreed upon with your client to allow VAT inclusive amounts.
A modified invoice will include all of the information that is on a full invoice, and also the product and total amounts inclusive of VAT.
Which invoice format should I use?
The invoice format you use depends on the prices and what you and your client have agreed on. You will likely use a full invoice for the majority of sales.
Full invoices can be used for any amount. Simplified invoices can be used for amounts up to £250. Modified invoices can be used on amounts greater than £250.
Here is a chart showing the differences between each type of VAT invoice:
Create VAT invoices with invoicing software
You can quickly and easily create and send invoices to clients using invoicing software. The software ensures that you have all of the required details filled in so you don’t need to worry.
If your business is VAT registered, you can switch VAT on for your invoices, and start issuing invoices inclusive of VAT.
If you sell products or services with different VAT rates, you can easily add them and change them on invoices. For each product line you add, you can enter a different VAT rate, and the VAT amounts will be calculated after the subtotal.
It is also simple to customise, add or remove items from an invoice by using our invoice designer. This way, you can create a simplified or full invoice in just a few clicks!
Invoicing software, like Debitoor, will also automatically create important accounting documents such as the VAT report so you can quickly send your VAT return to HMRC. For every invoice or expense you create, the system will automatically update the reports in real-time!