2. VAT & Business Documents

Question 1

A VAT invoice must show..

Answer 1

1. Unique invoice number which follows on from previous number.
2. Sellers name (or trading name) and address.
3. Sellers VAT number.
4. Invoice date.
5. Time of supply (tax point) if different.
6. Customers name (or trading name) and address.
7. Description of goods or services to enable customer to identify what is being charged for.

Question 2

A VAT invoice should also show… in the body

Answer 2

1. Unit price or rate (eg. For service) , excluding VAT
2. The quantity (might be hours)
3. The rate(s) of VAT that applies. (Can be more than one per invoice)
4. Total Net of VAT
5. Any prompt payment discount.
6. Total VAT amount.

Question 3

VAT Guide 700

Answer 3

.

Question 4

Electronic invoices must …

Answer 4

The format must be secure.
May be structured format such as XML
Or unstructured format such as PDF

Question 5

Situations VAT invoice is not needed…

Answer 5

1. Buyer is not VAT registered.
2. Seller is a retailer (although customer can ask for one).
3. Item is a free sample and normally subject to VAT.
4. If purchaser is on a self-billing system (purchaser issues invoice).

Question 6

Situations where VAT is included but only gross amount is shown.

Answer 6

1. Transaction total less than £250

2. Where the buyer? in agreement with the customer, issues an invoice in a modified format. ?

Question 7

Simplified invoices (amounts under £250)

Answer 7

1. Suppliers Name & Address.
2. VAT reg number.
3. Date of supply (tax point).
4. Description of the goods or services.
5. Total for each item including VAT.
6. VAT rate applicable to each item where the supply includes items at different rates.

Question 8

A simplified invoice cannot include …

Answer 8

..any exempt supplies

Question 9

Pro-forma invoice is a …

Answer 9

This is a document issued by a seller offering goods at a certain price and inviting buyer to send payment in return for which goods will then be supplied and invoices in normal way.

Question 10

A pro-forma invoice should be clearly marked…

Answer 10

‘This is not a VAT invoice’

Question 11

VAT receipts… explained

Answer 11

VAT receipts are not always issued by VAT-registered retailers but customer has a right to demand one, particularly if biz expenses are involved.

Question 12

VAT receipt must show…

Answer 12

1. Name & address of retailer.
2. VAT registration number.
3. Items charged at different VAT rates listed separately.

Question 13

EU customer invoice..

NB businesses selling goods & services within the EU strictly speaking are not ‘exporting’ but sending ‘dispatches’

Answer 13

If the buyer is not registered for VAT in that state must charge VAT (at normal rate for the goods/services) ie. same as UK.

If the buyer is registered for VAT can usually ‘zero rate’ the VAT charged.
(The ruling on VAT on SERVICES from B2B was amended Jan 2010, bringing in certain exceptions to this zero-rating).

Question 14

EU zero-rated invoice must show….

Answer 14

If buyer’s VAT registration number including country code is shown on the EU Customer Invoice.

Question 15

Calculating and rounding VAT

Answer 15

1. Total for invoice can be rounded down to nearest penny.
2. Should work out VAT per line and either:
   Round each line down to nearest 0.1p
   Or Round each line up or down to nearest 1p or 0.5p

Question 16

Calculating VAT when invoice or receipt has only gross amount…

Answer 16

Divide by 6 or 21

Question 17

Trade discount

Answer 17

Calculate VAT after discount applied

Question 18

Prompt payment discount

Rules changed in Finance act 2015

Answer 18

1. Assume PPD will be taken…
   Seller can invoice value after PPD has been applied. VAT calc on discounted amount.
   …if not taken then invoice the discount amount plus VAT calc on that.
2. Issue credit note.
   Issue full invoice with VAT calc on that.
   Issue credit note for the discount amount plus VAT calc on that.
3. Issue full invoice with Statement.
   Statement gives terms of PPD and amount to pay if taken.
   Statement also states that customer can only recover actual VAT amount paid to supplier.

Question 19

HMRC recommended wording for PPD statement

Answer 19

A discount if x% of the full price applies if payment is made within y days of the invoice date.

No credit note will be issued.

Following payment you must ensure you have only recovered the VAT actually paid.

Question 20

Tax point

Answer 20

the date on which the supply is recorded for the purposes of the VAT return. (Normally the date of the invoice)

Question 21

Different types of tax point (distinction by HMRC)

Answer 21

1. Basic tax point.

Goods:
Date supplier sends ..
Or customer collects ..
Or the supplier makes available for customer use (eg if assembling).

Services:
Date service carried out … normally date all work complete.

2. Actual Tax Point.
   a) advance payments:
   if VAT invoice issued or payment received BEFORE the BASIC TAX POINT then the date of the VAT invoice or payment (whichever first) becomes the Actual tax point.

b) 14 day rule:
If VAT invoice is issued UP TO 14 DAYS after basic tax point (date of supply) the date of ISSUE of the invoice becomes the Actual Tax Point.

14 day rule may be varied with written approval of local VAT office.
Eg a supplier may issue monthly invoices on a regular basis for supplies during whole month.
Date of invoice or Last day of month (consistently applied) will then become the Actual tax point.

Question 22

When calculation e.g number of days to last day can issue invoice… the supply date is day 1 NOT 0
So if supply on 15th start like
15/16/17/18/19/20/21

Answer 22

.