Managing invoices whilst waiting for VAT registration

Whilst waiting for your company to be VAT registered you cannot charge your clients for VAT. This guide provides an approach you can use to invoice your client before you have your VAT registration number.

Whilst waiting for VAT registration you can submit invoices to your clients. However, you cannot list the VAT until you get your VAT registration number. Instead, you can include the VAT within the invoice, provided it is not described as VAT.

This approach, if your customer agrees, allows you to invoice and receive payment including the sum that would be VAT, on the assumption that you will become VAT registered. This means you would not need to invoice for the VAT separately at a later date and your client will not need to process an extra payment.
The recommended method however, is to only invoice for your services excluding VAT, then send your client a VAT only invoice once you have your VAT registration number.

If you choose to apply this approach, once your have your VAT registration number, you will need to re-issue the invoices to ensure that you have applied VAT correctly.

Raising invoices whilst waiting for VAT registration

Here’s a short example:

  • you’re charging a client £1,000 (ex VAT) for services you’ve provided
  • whilst waiting for VAT registration you cannot apply VAT on your invoice
  • instead, you charge the client £1,200 in total (£1,000 + 20% for future VAT payments)
  • this is listed on your invoice as £1,200 and exempt from VAT
  • your client then pays £1,200
  • in the future you can re-issue the invoice for £1,000 + £200 VAT, without having to obtain a further payment from the client

The steps below explain how to invoice your client / agent for the full amount accounting for VAT, without showing VAT on the invoice.

1. Once you have set up your contract, click on Invoicing then Invoices. Next, press the New Invoice button and select your contract. If you have not created a contract you can use a Free Type Invoice.

2. Click Add invoice line then ether Billable time or Manual line and select the items you wish to invoice.


3. You then need to edit each line of your invoice to effectively include VAT. For example, if you have added hours from a timesheet, say 10 hours at £100, it will show the line total as £1,000. Click the pencil icon to the right and change the rate so it is inclusive of VAT. So a rate of £100, assuming the applicable VAT rate is 20%, would need to be changed to £120.


4. Click the green tick icon to confirm the line on your invoice and repeat for any other line items. Once complete you will have an invoice that is inflated by the amount of VAT, had it been a VAT invoice.

5. Press save then check your invoice carefully.

You will now have an invoice that effectively captures the VAT, without displaying it, that can be sent to your client / agent for full payment.

Editing and re-issuing invoices after VAT registration approved

When you receive your certificate of registration for VAT, your VAT settings can be updated by your account manager. This will allow you to edit invoices dated after your effective date to turn them into VAT invoices that can be re-issued to your client / agent.

If you have already received payments for any invoices raised using the approach in the section above, within the payment would be an amount of VAT. This means that you do not need to retrospectively invoice for the VAT.

Once you have had confirmation that your VAT settings in inniAccounts have been updated:

1. Click on Invoicing, followed by Invoices. Next, click on an invoice that needs to be reissued.

2. Click the Edit button. If it is greyed out, see the tip below.


3. Click on the pencil to the right of a line item on your invoice.

4. Change the Unit Price to remove any account of VAT, i.e. the actual rate you charge excluding VAT. In the example the rate was previous changed from £100 to £120 – this would then be changed back to £100.

5. Change the VAT rate to standard, or the applicable rate for the line item, then click the green tick icon on the right.



6. You will notice that the total value of the invoice is unchanged and the VAT is now shown separately.

7. Click Save Invoice.

You can now re-issue this invoice to your agent or client for their records.

If a transaction has been marked as confirmed in your bookkeeping, the transaction is locked to prevent editing.

To unlock the transaction, go into your bookkeeping and click on the item in your bank statement then click on Delete. You will notice that the transaction returns to the Pending Payment section at the bottom of the screen which means you can now edit the invoice.

Don’t forget that once you have finished editing you need to return to your bookkeeping and reconfirm the items to ensure your balances in inniAccounts and your Bank Statement match.

Updating transactions in Quick Entry and Bookkeeping

Any personally incurred expenses in the Quick Entry area, or transactions entered into your books prior to your company settings being configured as VAT registered would not have prompted you for any details on the VAT rates. Now that you are registered these transactions must checked and updated.

In the Quick Entry area and the Bookkeeping area, you will need to work through all your transactions dated after your effective date:

  1. Click on a transaction to see the detail, you will notice that the VAT rate is Exempt (0%). If this is not the correct rate for the transaction it needs to be edited.
  2. Click the Edit button and change the VAT percentage in the pull down menu. Note that you do not need to change the amount as that is the Gross amount on your receipt.
  3. Click Save and repeat for all other transactions.