What Is a VAT Invoice?
A VAT invoice is a specific type of invoice issued by a VAT-registered business. It differs from a standard invoice in that it must display the VAT charged on each item or service, your VAT registration number, and the applicable VAT rate. VAT-registered clients need your VAT invoice to reclaim the tax they've paid on business purchases.
When Are You Required to Issue VAT Invoices?
If you're VAT-registered in your country, you're generally required to issue a VAT invoice for every taxable supply you make to another VAT-registered business. For sales to consumers (B2C), requirements are less strict, but you must still provide a receipt upon request.
What Must a VAT Invoice Include?
In the UK and EU, a full VAT invoice must contain:
- A unique, sequential invoice number
- Your business name and address
- Your VAT registration number
- The invoice date and the tax point (date of supply)
- Your customer's name and address
- A description of the goods or services supplied
- The quantity and price per unit, excluding VAT
- The total amount excluding VAT
- The VAT rate(s) applied
- The total VAT amount charged
- The total amount including VAT
Simplified VAT Invoices
For invoices where the total (including VAT) is under £250 (UK) or €100 (EU), a simplified invoice is permitted. This requires fewer fields — you don't need the customer's details, for example. These are common for retail transactions and smaller service charges.
Zero-Rated and Exempt Supplies
Some goods and services are zero-rated (VAT at 0%) or exempt from VAT entirely. Zero-rated goods still need to appear on a VAT invoice but show 0% VAT. Exempt supplies shouldn't have VAT applied at all, and the invoice should note that the supply is exempt from VAT.
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When selling services to VAT-registered businesses in other EU countries (or from the UK to the EU post-Brexit), you typically zero-rate the invoice and add a note: "VAT reverse charge applies — customer to account for VAT." This shifts the VAT reporting responsibility to the buyer.
Keeping VAT Records
Most tax authorities require businesses to retain VAT invoices for at least 6 years. Storing PDF copies in a cloud folder organized by month is a simple and audit-proof system. Losing VAT invoices can result in penalties during a tax investigation.