HMRC Invoice Requirements in the UK

In the UK, His Majesty’s Revenue and Customs (HMRC) sets out the requirements for invoices to ensure correct record-keeping and adherence to tax law. HMRC invoice requirements specify what an invoice must include and what can be included according to business needs.

An invoice is a document that provides a detailed account of the products or services supplied by a seller to a buyer. It serves as a request for payment, sets out legal terms for payment, and is a legally binding document.

When is an invoice required in the UK?

For a VAT-registered company selling goods or services to another VAT-registered company, sending an invoice is a legal requirement. Invoices are generally used for business-to-business (B2B) transactions for goods or services but are not mandatory for exempt or zero-rated sales. Business-to-customer (B2C) sales do not generally require invoices.

HMRC invoice requirements are specified by law to include specific and detailed information about the seller, the buyer and the goods or services provided.

What is legally required?

The HMRC invoice requirements state that each invoice has a unique identification number; the company name of the supplier, plus address, and contact information; and the company name and address of the customer being invoiced.

It must give a clear description of what the customer is being charged for and the date the goods or service were provided, the time of supply (TOS). The date of the invoice must be also included.

The amount or amounts being charged and the VAT amount, if applicable, must be included. The total amount owed for all goods and services must also be included.

Contact details

For sole traders, the HMRC invoice requirements state that they must include their full name and the name they trade under.

Limited companies must use the full company name as it appears on the certificate of incorporation. Names of directors do not need to be included, but if they do include one director’s name, they must use them all.

Time of supply (TOS)

For invoices that include VAT, time of supply (TOS—sometimes referred to as tax point) is a legal requirement. It is important to note that TOS is not the same as invoice date.

VAT rate for each Item

The VAT invoice must include the rate of Value Added Tax (VAT) for each item on the invoice. These rates may be the standard VAT rate of 20%, the reduced VAT rate of 5%, or the 0% rate.

Unit price and total amount due

HMRC VAT invoice requirements state that the individual unit price including VAT must be included for each good or service provided to the customer.

The total amount due must also be stated, including VAT.

Payment terms and credit note

The HMRC states that UK businesses can set their own payment terms, such as discounts for early payment or upfront payment.

In the UK, unless a payment date is specified, payment is due within 30 days of receiving an invoice, or the goods or services provided.
 

The HMRC further requires that business record-keeping includes all credit notes. Where credit notes are issued, they must include the original VAT invoice identification number and date, and the total amount credited excluding VAT.

English translation if necessary

In the UK invoices need not be issued in English although an English translation must be provided to the HMRC upon request within 30 days. 

What are other invoice considerations? (i.e., language, currency, how long invoices should be retained, etc.)
 

A company can issue an invoice in any currency, but if an invoice is issued in a different currency to Great British Pounds (GBP) the VAT amount must be stated in GBP. 

The timeline allowed for issuing UK invoices is 30 days from the time of supply, or 30 days from the date of payment when it occurs before supply.

Convert foreign currency into sterling 

Where invoices that include VAT have been issued in any other currency than GBP, the conversion of the VAT amount must be done using either the HMRC’s published period rate, the UK market selling rate at the time of supply, or another rate used for commercial purposes approved by the HMRC.

Can electronic invoices be used?

Absolutely! Electronic invoices may be issued as long as the e-invoicing software is secure and can ensure the authenticity of the invoice origin, its content integrity and legibility, and the recipient is willing and capable of accepting it. E-invoicing is not mandated in the UK, but is mandated in other countries, with increasing adoption in the European Union (EU), especially for government procurement. Electronic invoices offer many benefits to businesses; VAT conforms to the same rules and regulations as traditional paper invoices, digitisation simply makes things easier. 

Invoice record keeping 

Considering the changes to the UK tax system under Making Tax Digital for VAT (MTD for VAT), in which digital record-keeping is now a legal requirement, electronic VAT invoices make a lot of sense for UK businesses wanting to streamline their tax-compliance processes.

In addition to compulsory digital record-keeping for VAT filing, UK VAT invoice requirements mandate how long they should be kept, which is at present six years.

In the UK there are several distinct types of invoices where VAT is either charged or exempt each with their own HMRC-defined requirements. 

Standard VAT invoice

The standard VAT invoice or a full VAT invoice includes all the invoice details outlined above for what is legally required in any invoice. However, the requirements for standard UK VAT invoices must include additional information.

In addition to the seller's and buyer’s name and address, the seller's VAT registration number is required. In Northern Ireland, the customer’s VAT registration number is required when selling to companies in EU member states.

The price per item excluding VAT, the VAT rate, the total VAT amount, and the total including VAT must be included.

On top of this, the HMRC stipulates that the invoice must detail instances and account for VAT under the ‘reverse charge’ mechanism, reference instances of ‘self-billing’, and indicate when and where the ‘margin scheme’ has been applied.

Simplified VAT invoice

A simplified VAT invoice is employed in specific cases where a reduced amount of information is required. Typically issued for transactions under £250 (including VAT), it includes essential details like the seller's name, address, VAT registration number, a unique invoice number, date, clear goods/services description, total amount (including VAT), and a statement confirming its simplified nature.

Non-VAT invoice

Non-VAT Invoices are utilised when a business is either not registered for VAT or when the supplied goods or services are exempt from VAT. Essential details must include the seller's name and address, a unique invoice number, date of issuance, a precise description of the goods or services, and the total amount, excluding VAT.

Modified VAT invoices

The standard invoice can be issued for any amount, but a modified VAT invoice differs in that they are only issued for products and services over the value of £250, and for each line item on the invoice, they specifically detail the total amount, including VAT.

VAT invoice exceptions

A VAT invoice is not required when goods are given as a gift, donated to a charity, or sold under a VAT second-hand margin scheme.

VAT is not charged for exempt or zero-rated sales within the UK (although a 0% VAT rate must be shown on the invoice) or if the customer operates a self-billing arrangement.

Obtaining a solid understanding of and adherence to HMRC invoice requirements is crucial for UK businesses, ensuring accurate record-keeping and compliance with tax laws. Knowing exactly what an invoice must include and what type of invoice a business can leverage is essential for seamless business operations, tax compliance and avoiding penalties within the UK tax system.