Creating a VAT only invoice

When you receive your VAT registration number from HMRC you may need to raise an invoice just for VAT if your date of registration on your VAT certificate is in the past.

Whilst waiting for HMRC to issue a VAT registration number, it is not uncommon for a business to raise invoices. If invoices are raised before the VAT registration is issued, VAT cannot be charged on those invoices as you must have a valid VAT registration number.

When HMRC issues a VAT registration number they will also confirm the ‘effective date of registration’. The effective date is the date from which the company is VAT registered from and the date from which VAT needs to be charged on any services. If any invoices have been issued for services that were provided after the effective date of VAT registration and VAT has not been charged, a VAT only invoice needs to be issued to the client / agent.

It is important to issue a VAT only invoice and collect the payment otherwise you’ll be out of pocket to HMRC, particularly if you are using the Flat Rate Scheme.

Raising a VAT only invoice

The video above explains how to determine which invoices you need to charge VAT on and shows you how to create a VAT only invoice. Alternatively you can follow the steps below.

  1. Create a new invoice
  2. Add a Manual Line item to the invoice by clicking on Add Manual line then select an option, i.e. Professional Services
  3. Enter the description, quantity and the unit price (exclusive of VAT). The unit price would be the net amount of the invoice you have already issued that you need to charge VAT on
  4. Set the VAT Rate accordingly, i.e. Standard 20% or Lower rate
  5. Click the green tick to the right of the line to confirm it
  6. Add another Manual Line to the invoice and enter the description and quantity
  7. Enter the unit price (exclusive of VAT) exactly as the previous line item but make it negative amount
  8. Set the VAT rate on this line item to Exempt (0%)
  9. Click the green tick to confirm the line
  10. Save the invoice

You will now have an invoice with 2 items where the line item amounts cancel each other out however, the VAT will remain on the invoice. You can now issue this invoice to your client or agent for payment.

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