Apart from the contract itself the invoice is the most important business document you possess. It is evidence that a transaction has taken place. Attached to the commercial invoice are many legal, regulatory and fiscal requirements.
It is against the commercial invoice that a financial reconciliation is made which leads on to determine profit and loss.
From a fiscal perspective, the invoice also provides the evidence for tax collection.
There are two standard commercial invoices; purchase and copy sales. Purchase invoices are issued by suppliers and copy sales are ones you issue to your customers. You must keep a record of both. VAT-registered businesses must issue VAT invoices within 30 days.
Organisations can now send commercial invoices electronically as they move over to the 'paperless office'. This article provides an introduction to commercial invoices and introduces further articles on the more sophisticated e-invoicing.
Commercial invoice details (United Kingdom)
The commercial invoice must include:
- A sequential number based on one or more series which uniquely identifies the document;
- the time of the supply;
- the date of issue of the document (where different to the time of supply);
- the name, address and VAT registration number of the supplier;
- the name and address of the person to whom the goods or services are supplied;
- a description sufficient to identify the goods or services supplied;
for each description, the quantity of the goods or the extent of the services, and the rate of VAT and the amount payable, excluding VAT, expressed in any currency;
- the gross total amount payable, excluding VAT, expressed in any currency;
- the rate of any cash discount offered;
- the total amount of VAT chargeable, expressed in sterling;
- the unit price
- the reason for any zero rate of exemption.
EU commercial invoices
When invoicing to organisations based in other EU Member States, you must also include the following information on the invoice
- the letters ‘GB’ in front of your registration number for cross border supplies;
- the registration number of the recipient of the supply preceded by the alphabetical code of the relevant EU Member State;
- a reference to any new means of transport.
You can keep the VAT account in the way that suits your business, provided it contains the information described below.
To show the link between the output tax in your records and the output tax on the return, you must have a record of:
- the output tax you owe on sales;
- the output tax you owe on acquisitions from other EU member states
- the tax you are required to pay on behalf of your supplier under a reverse charge procedure
- tax that needs to be paid following a correction or error adjustment
- any other adjustment required by VAT rules
To show the link between the input tax in your records and the input tax on your return you must have a record of:
- the input tax you are entitled to claim from business purchases
- the input tax allowable on acquisitions from other EU member states
- tax that you are entitled to following a correction or error adjustment
- any other necessary adjustment
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