Invoicing can sometimes be unexpectedly tricky, and when invoicing between countries, there may be some challenges you have to face. This blog post discusses how to send an invoice from the UK to Ireland and answers some questions you may have regarding VAT and currency concerns.
Here, ‘Ireland’ only refers to the southern part of the island. Together with England, Scotland and Wales, Northern Ireland makes up the UK, and so this post is equally applicable for a Belfast-based company invoicing a customer in Dublin, as it is for a company based in Cambridge, Glasgow or Aberystwyth.
What information must my invoice to Ireland contain?
Regardless of whether you’re invoicing your neighbour, a customer in Ireland, or businesses further afield, there are some basic things that every invoice must include. Whichever invoice template you use, it should contain information about yourself, your customer, the product(s) sold, invoice details (i.e. a unique invoice number, the date of issue, the due date), and the subtotal and total amount to be paid.
Should I apply VAT on my invoice to Ireland?
Whenever you invoice an Irish customer, you must obtain their VAT registration number and include it on the invoice. This consists of nine digits in total (seven numbers and two letters).
Both the UK and the Republic of Ireland impose VAT under the same name and the countries have strong links. It’s therefore easy to think that there’s a single VAT system that covers both countries. But, they’re actually two separate systems within the European Union VAT Area.
When considering whether you need to apply VAT, you must ask:
- Am I providing goods or services?
- Am I invoicing an Irish business or an Irish customer (i.e. a person)?
Different rules apply depending on your answers. Here, we explain some of the basic rules about when you should and shouldn’t charge your Irish customer VAT.
Should I add VAT when exporting goods from the UK to Ireland?
Proof of export
A UK business that’s VAT-registered doesn’t need to charge VAT on goods that it sends to Ireland, as long as it keeps documentary proof of export. This may also be known as ‘evidence of removal from the UK’ and it must show that a supply has taken place, and the goods have left the UK.
This documentation should include the customer’s order, inter-company correspondence, a sales invoice, transport documents from the carrier responsible for removing the goods from the UK, bank statements that evidence payment, and any other relevant documents that you would normally get during an international business transaction.
There is no minimum amount of proof that’s needed. But, it’s in your interest to obtain as much evidence as possible: if VAT wasn’t charged but it should have been added, you will be liable to pay.
Ask yourself: do goods physically move across borders?
When thinking about whether or not you should charge your Irish customer VAT, you need to think about the physical movement of the goods you’re selling, and not about the invoicing name or address. So, if you’re invoicing an Irish customer and the goods are not leaving UK soil, you should charge VAT as this is not an export. Equally, UK customers in Ireland who don’t have an Irish VAT number should be charged UK VAT.
Report the sale’s net value on the UK VAT return
No matter the situation, and even if you don’t need to charge VAT, the net value of the sale still needs to be reported on the UK VAT return. It’s also possible for you to reclaim any UK VAT on goods you’re exporting, following the standard rules about reclaiming input VAT.
When to still charge UK VAT
If your Irish customer isn’t registered for VAT, and your business isn’t registered for Irish VAT, then you still have to charge UK VAT on your invoice. Note here though that some products are always VAT exempt in the UK, e.g. children’s clothing, and so in these situations, VAT wouldn’t be applied.
Should I add VAT to services I provide to Irish customers?
Services for Irish customers
Generally speaking, if you invoice an Irish customer for a service you offer, that service is subject to UK VAT. This means that you must charge UK VAT for your services at the normal UK rate. This rate is either standard, reduced, zero-rated, or exempt depending on circumstances. Your UK-based business should account for VAT in the standard way.
Services for Irish businesses
If you’re invoicing an Irish business for a service however, UK VAT will not be charged and this will fall within the boundaries of Irish VAT instead. It’s possible for a service you provide to be considered for a 'business purpose’ without your customer being registered for VAT. But, there should then be some kind of documentation that evidences the business purpose.
If you're not charging your Irish (business) customer VAT, they’ll be responsible for doing it themselves, following the Irish reverse-charge procedure. On your invoice, you’ll then need to include a statement that says something like, ‘This service is subject to reverse charge’.
So, when should I apply VAT to my invoice?
The short answer is, it depends. When you’re exporting products to Ireland from the UK, your invoice doesn’t need to have VAT, but it’s necessary to keep documentation as proof. When your invoice is for a service, VAT may need to be added, depending on whether you’re invoicing an Irish customer or Irish business.
Location is everything. If you invoice an Irish company, you must ask yourself where they'll use your product or service the most. Even if their headquarters are in Dublin, but your services are used in their offices in Bristol and Manchester, then, even though the company is Irish, your services are actually still used in the UK. VAT should therefore be applied.
All this to say, whether or not VAT should be applied to your invoice is often context-dependent. If you’re still confused, advice from an accountant will certainly help you when you need to invoice your Irish customers.
Should my invoice to Ireland use GBP or EUR?
Whenever you’re sending an overseas-customer an invoice, it’s natural to wonder what currency to issue the invoice in. Is it better to invoice in GBP, or save them the hassle of currency conversion and invoice in their local currency?
In the UK, businesses have flexibility regarding what currency they want to issue their invoices in. But, you have to remember that if VAT is due in the UK, then the total amount of VAT must be shown in pounds.
The Republic of Ireland’s currency is the Euro and so, as a UK business, if you then choose to invoice in EUR, this would usually be seen as a courtesy to your Irish customer - something above and beyond what is required. And whilst nice, it will demand some more work on your part.
How can I convert my prices from GBP to EUR?
If you invoice in EUR, you must use an up-to-date exchange rate so that your prices are accurate and you don’t overcharge (or undercharge) your customer. To convert your prices from GBP to EUR you can either use the mid-market selling rate at the time your invoice is issued, or use the exchange rates published by HMRC.
What about changes in exchange rates?
One of the most important things to bear in mind if you don't invoice in GBP is that exchange rates are always fluctuating, which can result in exchange gains or losses. If you invoice your Irish customer in EUR and the exchange rate changes between issuing the invoice and receiving the payment, you may end up receiving less than expected.
It would be your responsibility to cover this loss, and if this happens, you should record it in your accounts as an unrealised loss. Equally, any gains caused by changes in exchange rates must be shown in your accounting records.
How Debitoor invoicing software can help you
Debitoor invoicing software makes it easy for you to invoice your Irish customers from the UK. Following the pre-built invoice template, you can create and send your invoice in no time.
You can choose the currency you want to invoice your Irish customer in and choose how you want to apply VAT to your products and services. Debitoor invoicing software also allows you to disable the VAT function and instead enter any legislative details at the bottom of your invoice under ‘Terms’.