UK VAT invoicing rules for technical founders

If your business makes taxable supplies in the UK, you need to know which VAT rate applies, when you must register, and what a VAT invoice must contain. This guide covers those general rules. The rules come from the VAT Act 1994 and the VAT Regulations 1995.

VAT rates

The UK has three VAT rates. The standard rate is 20%, and it applies to most goods and services. The reduced rate is 5%, and it covers items such as children's car seats and home energy. The zero rate is 0%, and it covers goods and services such as most food and children's clothing. Check GOV.UK's rate list before you hard-code a rate, because the category for each product is what drives the rate.

Registration threshold

You must register for VAT when your taxable turnover over the previous 12 months goes above £90,000. You must also register if you expect your taxable turnover to go above £90,000 in the next 30 days.

If you have already passed the threshold, you must register within 30 days after the end of the month in which you crossed it. Your registration takes effect on the first day of the second month after you crossed it. If you expect to cross it in the next 30 days, register by the end of that 30-day period, with the effective date set to the day you realised it would happen.

What a VAT invoice must show

Regulation 14 of the VAT Regulations 1995 sets the content of a full VAT invoice. It must show:

• A sequential number that uniquely identifies the document.
• The time of supply and the date the invoice was issued.
• The supplier's name, address and VAT registration number.
• The name and address of the person receiving the goods or services.
• A description of the goods or services sufficient to identify them, with the quantity, the VAT rate and the amount payable excluding VAT for each item.
• The total payable excluding VAT, any cash discount rate, and the total VAT in sterling.
• Where they apply, a margin scheme reference, a reverse charge reference, or a free zone reference.

When to issue an invoice

Under regulation 13(5), you must provide a VAT invoice within 30 days of the time the supply is treated as taking place under section 6 of the Act. HMRC can allow a longer period. A registered business that supplies goods or services to another taxable person must provide that person with a VAT invoice (regulation 13(1)(a)).

Next step

See the developer documentation to model UK VAT rates and invoice fields in your integration.