| HMRC Reference: VAT Info Sheet 10/07 |
VAT Information Sheet 10/07
July 2007
It explains some changes to current VAT invoicing regulations. These include a minor change to the numbering of invoices and new rules to clarify the VAT treatment when making margin scheme supplies, supplies to business customers in the UK when the customer accounts for the VAT, and supplies to business customers in other EU countries.
While the new regulations apply to the whole of the VAT population, for most this will not require changes to their current invoicing procedures. Those most likely to be affected are:
The new law comes into force on 1 October 2007. However, as is common with such regulations, in the first year of the new requirements HMRC will issue penalties for non compliance with the new requirements only in exceptional cases.
The changes follow the commencement of formal infraction proceedings by the European Commission on the grounds that the UK had not fully implemented the VAT Directive. The government has now introduced regulatory changes to bring domestic legislation fully in line with EU VAT law.
The relevant law is the Value Added Tax (Amendment) (No 5) Regulations 2007, amending Regulations 13 and 14 of the Value Added Tax Regulations 1995.
Currently there is a requirement for a VAT invoice to have an identifying number. The change will require this number to be from a series that is unique and sequential.
For most businesses this formal, legal change will have no impact on their current invoicing practice and the Frequently Asked Questions cover some common concerns.
You will be required to include one of three references – a reference to the relevant article in the EC Directive, a reference to the relevant UK legislation, or any other reference indicating that a second hand margin scheme has been applied.
The way in which margin scheme treatment is referenced on an invoice is a matter for business and not for HMRC. The legend detailed in Notice 718, paragraph 3.7 is no longer acceptable to reference the fact that the supply is a margin scheme supply. Businesses may, if they wish, use this legend until they migrate to a new form of acceptable reference over time as they reprint invoices or upgrade software.
A revised version of Notice 718 will include suggested alternative legends which may be adopted. Examples of alternative legends will include:
Notice 718 Margin schemes for second-hand goods, works of art antiques and collectors items
You will be required to include one of three references – a reference to the relevant article in the EC Directive, a reference to the relevant UK legislation, or any other reference indicating that TOMS has been applied.
Although the regulation of TOMS referencing is new, it will only affect business to business transactions, and businesses will have a wide range of choice in deciding the best way of referencing TOMS treatment. HMRC will allow affected businesses the widest possible discretion in adapting commercial or industry norms to meet the 'any other reference' requirement.
Examples of acceptable indications will include the following:
For the purposes of the new regulations, an exempt supply is a supply that, if made in the UK, would be exempt under Schedule 9 of the Value Added Tax Act 1994. Where an invoice is required you will need to include one of three references – a reference to the relevant article in the EC Directive, a reference to the relevant UK legislation, or any other reference indicating that the supply is exempt, or subject to the ‘reverse charge’.
The regulations make it clear that a requirement to issue invoices for exempt supplies only arises when the supply is business to business, across an EU border and an invoice is required by the Member State of receipt. Because custom and practice varies widely even in member States whose legislation ostensibly requires an invoice, you should always be guided by your customer about the need for an invoice.
The way in which the intra EC exempt or reverse charge treatment is referenced on an invoice is a matter for business and not for HMRC. Our aim is to reduce the impact of change by allowing affected businesses the widest possible discretion. Suggested statements that indicate the invoiced supply to be exempt or subject to the reverse charge are included below.
For intra EC zero-rated supplies of goods (dispatches) you will need to include one of three references – a reference to the relevant article in the EC Directive, a reference to the relevant UK legislation, or any other indication that the supply is a zero rate intra EC supply.
The way in which the zero rate treatment is indicated on an invoice is a matter for business and not for HMRC. Our aim is to reduce the impact of change by allowing affected businesses the widest possible discretion. It is possible that, in some cases, the format and information already used on invoices is sufficient to satisfy the new rules.
Examples of references under the third option include:
Further information in relation to the consultation can be found on the JVCC page of HMRC internet site, which includes two VAT Invoicing consultation papers explaining the legal background to these changes.
If you require further information about VAT invoicing please ring the National Advice Service on 0845 010 9000 (if you are outside the UK please call +44 2920 501 261). The advice service is open Monday to Friday, 8.00am to 8.00pm.
If you have hearing difficulties, please ring our Textphone service on 0845 000 0200.
If you would like to speak to someone in Welsh, please call 0845 010 0300. The Welsh service is open Monday to Friday 8.00am to 6.00pm.
The ‘invoice number’ can be numerical, or it can be a combination of numbers and letters, as long as it forms part of a unique and sequential series.
Yes, as long as the invoice series runs consecutively from that point.
Yes, this would have the affect of creating a unique and sequential series.
Yes, it is acceptable to operate more than one sequence at the same time.
Yes, it is acceptable to operate more than one sequence at the same time.
As long as you retain the cancelled or spoiled invoice in your accounting records, or you can provide an explanation for the break in sequence, this is acceptable.
Under the new regulations the way in which margin scheme treatment is referenced on an invoice is a matter for business. Paragraph 2.4 above provides some examples of acceptable legends.
You will be required to include one of three references – a reference to the relevant article in the EC Directive, a reference to the relevant UK legislation, or any other reference indicating that the Tour Operators Margin Scheme has been applied. Our intention is to provide businesses with the widest possible discretion in meeting the ‘any other reference’ requirement. Paragraph 2.5 above includes some suggested references.
No. The legend is only required where you issue an invoice to other business customers.
The changed approach will require a reference on the invoice when an exempt supply is made to a business customer in another Member State and an invoice is required in that Member State.
In practice, the requirement will only apply if a business customer in another Member State requests such an invoice, as this will indicate that the Member State in question requires an invoice for exempt supplies.
You do not have to describe the treatment in the receiving Member State. You need only to explain why VAT has not been charged on your invoice. This can be done by reference to EC legislation, UK legislation or by a simple statement that the supply is exempt.
No. There is no requirement for invoices to be raised for exempt supplies made by you in the UK to a UK customer.
If this would be an exempt invoice in the UK it is sufficient to indicate that fact. You should be guided by your business customer and if they require a reference to the reverse charge procedure you can do this by reference to the EC legislation, UK legislation or you can include any other reference indicating that the supply is subject to the ‘reverse charge’ procedure.
Details of the scheme and your invoicing liabilities are contained in Notice 701/21, which includes details of the form of words to be used on such VAT invoices. This form of words will satisfy the new rules but you are allowed to change it if you wish providing the new form of words clearly indicates that the customer is liable to account for and pay the VAT.
There are special reverse charge arrangements for sales of specified goods (currently mobile phones and computer chips), where the supplies are business to business between VAT registered taxpayers in the UK.
VAT Information Sheet 08/07 (VAT: Reverse charge for purchases and sales of mobile phones and computer chips) provides more details, including suggested annotations that you must include on the invoice to indicate that it is subject to a reverse charge.
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Changes to VAT invoicing with effect from October 2007 (Acrobat PDF, 65KB) 
