What is a Tax Invoice?
A tax invoice is a detailed document required under value-added tax (VAT) regulations. It must be issued by a taxable person to another taxable person when a taxable supply is made that exceeds £100. This invoice includes critical information to ensure both parties adhere to VAT obligations. For transactions below £100, a less detailed invoice suffices.
Key Information on a Tax Invoice
- Supplier’s Information:
- Name
- Address
- VAT registration number
- Transaction Details:
- Tax point (date of supply)
- Invoice number
- Description of goods or services supplied
- Customer’s Details:
- Name
- Address
- Financial Details:
- Amount excluding VAT
- Amount of VAT charged
Examples of Tax Invoice
Example 1: A company supplies office furniture to another business worth £500.
- Supplier: ABC Furniture Ltd.
- Address: 123 High Street, London
- VAT Registration Number: GB123456789
- Tax Point: 01/11/2023
- Invoice Number: 2023-456
- Customer: XYZ Corporation
- Customer Address: 456 Business Ave, Manchester
- Description: Office Chairs
- Amount excluding VAT: £416.67
- VAT (20%): £83.33
- Total: £500.00
Example 2: A marketing agency charges a client for a series of advertisements amounting to £150.
- Supplier: Bright Marketing Agency
- Address: 789 Market Road, Bristol
- VAT Registration Number: GB987654321
- Tax Point: 15/11/2023
- Invoice Number: 2023-789
- Customer: Digital Ventures
- Customer Address: 321 Start-up Blvd, Leeds
- Description: Online Advertisements
- Amount excluding VAT: £125.00
- VAT (20%): £25.00
- Total: £150.00
Frequently Asked Questions
What is a taxable person?
A taxable person is an individual or business registered for VAT, which is responsible for collecting and remitting VAT on taxable supplies.
What constitutes a taxable supply?
A taxable supply refers to any sale of goods or services that are subject to VAT. This includes most business transactions.
When is a tax invoice required?
A tax invoice is required for all taxable supplies made to another taxable person if the amount exceeds £100.
Can a less detailed invoice be provided for supplies below £100?
Yes, a less detailed invoice is acceptable for supplies under £100, but it should still include essential details such as the VAT registration number, description of goods or services, and the total amount including VAT.
What if the transaction is between a taxable person and a non-taxable person?
Full invoice details are typically not mandatory, but businesses often provide them as good practice. However, standard retail receipts might suffice unless the customer specifically requests a VAT invoice.
Related Terms
Value Added Tax (VAT): A consumption tax added at each stage of production and distribution based on the value added at that stage.
VAT Registration Number: A unique identifier issued to businesses registered for VAT purposes.
Tax Point: The date when a transaction is considered to have occurred for VAT purposes, typically the date of delivery or invoicing.
Taxable Supply: A sale of goods or services that is subject to VAT.
Online Resources
- HMRC: VAT Guide (Notice 700)
- European Commission: Overview on VAT
- Gov.uk: VAT Invoices and What They Need to Show
Suggested Books for Further Studies
- “Value Added Tax: A Comparative Approach in Theory and Practice” by Alan A. Tait
- “CCH VAT Guide” by Michael J. Hicks
- “Understanding VAT” by Barbara L. Martin
Accounting Basics: “Tax Invoice” Fundamentals Quiz
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