New Invoicing rules in the UK
HMRC recently announced that the change in rules affecting invoicing in the UK had been deferred to 1 October 2007. They have subsequently issued more detailed guidance on what a business has to do to meet the new requirements. This is in Information Sheet 10/07 – Changes to VAT invoicing with effect from October 2007 – which can be found on HMRC’s website (http://tinyurl.com/34xzsy)
For the most part the new rules affect businesses that:
* use margin schemes like the Second-hand Goods Scheme and the Tour Operators Margin Scheme;
* are involved in the intra-EC supply of goods and services; and
* businesses making supplies where the customer accounts for the VAT (known as Reverse Charge).
One change to the rules affects all businesses that issue full VAT invoices. This is the rule that requires invoices to be numbered. The new rules require the number to be part of a sequential series. This is unlikely to require many businesses to change their current method of numbering their invoices.
Users of the Second-hand Margin scheme will have to change the legend that appears on their invoices identifying the supply as being covered by the scheme. The legend specified in Notice 718 at paragraph 3.7 will no longer be acceptable. The new legend will be much simpler and has to fit into one of three required by the law. The reference will either have to refer to the relevant article in the EC Directive, or the UK legislation, or any other legend that clearly indicates that the Second-hand Margin Scheme has been applied. The reference could be as simple as: “This is a Second-hand Margin Scheme supply.”
Users of the Tour Operators Margin Scheme (TOMS) will also have to add a reference to their invoices where the supply is to a business. The new reference will have to follow the same rules as that suggested for the Second-hand Margin Scheme, but making reference to the TOMS rules! A simple legend could be: “This is a Tour Operators Margin Scheme supply.”
Things are a little more complicated for Intra-EC supplies that are either exempt from VAT or covered by the Reverse Charge rules.
For exempt and Reverse Charge supplies the requirement to issue an invoice only arises for business to business supplies. The need to identify the type of supply exists for these supplies but HMRC have not specified what needs to be put on the invoice to achieve the desired result.
The change for zero-rated supplies requires that the invoice bear a reference to the type of supply and again doesn’t specify what should go on the invoice.
In some cases the customer’s requirements to meet local rules may have to be taken into account when putting a suitable legend on invoices.
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