At first glance, VAT invoices look no different to standard invoices – and in many ways, these two types of invoices are extremely similar. However, there are a few key differences between standard invoices and VAT invoices, so it’s important to know what sets them apart.
This blog post compares standard invoices and VAT invoices, looking at who can issue them, the information that you need to include, and how you should keep records of your invoices.
Who can issue an invoice vs. who can issue a VAT invoice
A VAT invoice is a specific type of invoice that should only be issued for sales liable for VAT. This means that VAT invoices should only be issued by VAT-registered businesses, and they should only be issued for goods or services that are subject to sales tax.
If your business isn’t registered for VAT, you shouldn’t charge sales tax, and you should always issue standard invoices instead of VAT invoices.
Information on invoices vs. information on VAT invoices
Whether you send standard invoices or VAT invoices, every invoice you issue should include details about:
- Your business: your business name, your registered address, and your Company Registration Number (if you have one).
- Your customer: your customer’s name, address, and contact details.
- The invoice: a unique invoice number, a date of issue, and the word ‘Invoice’.
- The products sold: unit prices, quantities, any discounts provided, and the total amount due.
As well as these details, VAT invoices should also show some extra information about tax, including:
- Your VAT number
- The VAT rate(s) charged
- The total amount before VAT
- The total amount of tax due
- The total amount due including VAT.
As standard invoices are only issued for sales that aren't liable for sales tax, they don't need to include these extra details.
Record keeping for invoices vs. record keeping for VAT invoices
As a freelancer or small business owner, you’re responsible for keeping complete, detailed records of your financial transactions, so it’s important that you have a good system in place for documenting your income and expenses.
Whether you send standard invoices or VAT invoices, you can usually choose between using online software to keep digital records and keeping physical, paper copies of your receipts and invoices.
If your business is registered for VAT, you need to keep records of your VAT invoices for a minimum of six years (or ten years if you use the VAT MOSS service). HMRC might use these records to confirm that you’ve been charging and paying the correct amount of VAT.
If your business isn't registered for VAT, you need to keep records of your invoices for a minimum of five years. HMRC might use these records to check whether you’ve been completing your Self Assessment properly.
How to issue invoices and VAT invoices with Debitoor
Debitoor invoicing software makes it easy to create both standard invoices and VAT invoices from your computer, phone, or tablet.
How to issue a standard invoice with Debitoor
With Debitoor, you can create and send invoices in less than a minute. Check out our tutorial about creating your first invoice with Debitoor to find out how.
How to issue a VAT invoice with Debitoor
Before sending a VAT invoice with Debitoor, you first need to activate VAT. You can do this by going to ‘Settings’, scrolling to ‘Tax and Registration’, and then clicking the ‘On’ button next to ‘Apply VAT to income and expenses’.
Once you’ve activated VAT, you should add your VAT number to your company profile. Type your VAT number in the field labelled ‘VAT No.’ – whatever you enter will save automatically.
Once you’ve activated VAT and entered your VAT number, you’re ready to start creating VAT invoices. Follow the steps in our tutorial – and make sure that you enter the correct tax rates when you add your products.