Non-VAT invoice

Use this non-VAT invoice template to provide invoices to your customers that do not include VAT. This template invoice contains all the information that you are legally required to provide on a non-VAT invoice to your customers. It can be used when you are selling goods or services. Your invoice will not include VAT if you are not registered for VAT, the goods or services you are selling are exempt from VAT or zero-rated, or the goods or services are a gift. This template is designed to be used on your company letterhead, which should include your registered address and company registration number. If you require a VAT invoice template, see VAT invoice . You can also purchase this non-VAT invoice template as part of the Starting an online business toolkit and/or the Debt collection toolkit .
£10 + VAT

VAT invoice

This VAT invoice template can be used to prepare invoices to your customers that include VAT. It contains all the information that you are legally required to provide on a VAT invoice. This VAT invoice can be used when you are selling goods or services. It provides a clear record of VAT charged, the goods and services provided, and other information required by law. This template is designed to be printed on your company letterhead, which should include your registered address and company registration number. If you do not need to issue a VAT invoice, you can find a non-VAT invoice at Non-VAT invoice . You can also purchase this VAT invoice template as part of the Starting an online business toolkit and/or the Debt collection toolkit .
£10 + VAT
See all solutions
VAT, invoicing and payments
VAT invoicing
Q1:When do I need to send my customer a VAT invoice?

If you sell and/or services to another business, and both of you are registered for , you will generally need to send them a . For more information on registering for , see When to register for VAT.

Usually, must be issued within 30 days of the date you supplied the or services, or if you were paid in advance, the date on which you were paid for supplying the or services. You can send the in electronic form, as long as the customer accepts electronic invoicing. You must keep copies of all the you issue, and all the you receive.

See Q&A 2 for guidance on circumstances in which you do not need to send a .

For information on what needs to be included in a , see Q&A 4. You can find a template at VAT invoice.

Q2:When do I not need to send my customer a VAT invoice?

Only businesses can send , so if your business is not registered for you will not need to send . Even if you are , you will not need to send a if:

  1. the sale only involves or services sold within the that are or are exempt from ;

  2. the or services are a gift;

  3. you sell under a second-hand (guidance on these types of schemes is currently outside the scope of this service); or

  4. you have agreed with the customer that they will write up their own . These are known as a ' agreement' and 'self-billed invoice' respectively.

    Your consent to a agreement needs to be set out in a formal document signed by you and the other business.

    The government has produced a self-billing agreement template that complies with the relevant law to assist you. You must keep a copy of any agreement you are part of.

There are specific rules for retailers (ie businesses that sell directly to the public) regarding on sales. If you are a retailer, you only have to provide a if your customer requests one. If the sale is for or services costing £250 (including ) or less, you need only provide a short-form . See Q&A 4 for details of what needs to go in such an invoice. You can find a template at VAT invoice - retail customers purchases of £250 or less.

Q3:When do I need to send my supplier a VAT invoice?

You may wish to enter into a with your supplier, whereby you create for the or services they supply to you and forward a copy, usually with the payment. These arrangements are most common when you work out the price for the or services you purchase, after receiving them.

If you want a , you must have a signed agreement in place with your supplier. These agreements usually last for 12 months and should be reviewed and renewed as required, although you can agree to a longer period. The government has produced a agreement template that complies with the relevant law to assist you. You must keep a copy of any agreement that you sign.

If you do not have a valid agreement, any invoices you produce for your supplier will not be valid and you will not be able to reclaim the you have paid under them.

A must comply with the law on invoicing. See Q&A 4 for the contents of a , and see VAT invoice for a template.

Q4:What must I include in my VAT invoices?

For information on when you need to send an invoice, see Q&A 1 and Q&A 3.

The required contents of a depend on who it is for and what accounting scheme you are using. If you are not sure what accounting scheme you are using, ask your accountant for advice.

This question deals with sales requiring and the reduced requirements for retail customers on sales worth £250 (including ) or less.

  1. :

    For an example template, please see VAT invoice.

    If you have to produce a , you will normally need to ensure that it contains the following information:

    1. a unique invoice number that follows on from the last invoice you sent (sequential numbering);

    2. your business name, address and ;

    3. the date of the invoice;

    4. the name and address of the customer you are invoicing;

    5. a clear description of the or services provided, including quantity of or extent of the services;

    6. when the were sent, collected or made available or the services were performed;

    7. the rate of any cash discount;

    8. the applicable rate(s) of . If some of the or services are exempt from or , it should be made clear that no is being charged here;

    9. the total amount excluding ;

    10. the total amount of (this must be expressed in sterling); and

    11. the total price payable including .

      Note that if you are paid by a customer in cash, if asked, you must endorse the customer’s copy of the invoice with the amount paid and the date of payment.

  2. Retail customers making purchases of £250 (including ) or less:

    For an example template, please see VAT invoice - retail customers purchases of £250 or less.

    You only need to include the following information on the invoice:

    1. your business name, address and ;

    2. a clear description of the or services provided (the invoice should not contain any reference to any or service exempt from );

    3. when the were sent, collected, or made available or the services were performed;

    4. the applicable rate(s) of ;

    5. if more than one rate of is applicable, the total amount payable including for each rate; and

    6. the total price including .

There are currently different rules governing for trade to other of the , for some supplies of services or that are subject to a warehousing or , and for . At present, these are beyond the scope of the service.

Q5:What must I include in my non-VAT invoices?

Non- should contain enough information to secure payment from the customer and act as a record of the transaction. As such, you should ensure the following information is included:

  1. a title indicating that it is an invoice (rather than eg a receipt);

  2. if your business is a registered , the full , number and office;

  3. your contact details;

  4. the customer's name and address;

  5. the date of the invoice;

  6. a unique identifying number (so that this invoice is not confused for another one);

  7. a detailed breakdown of what you are charging for and when it was supplied (more detail makes it easier to tell what the customer has been billed for when you or they look back at the invoice);

  8. the price of each item in the breakdown;

  9. the total price; and

  10. the date for payment together with any details about acceptable methods of payment.

See Non-VAT invoice.

Taking payments
Q6:What options for taking payment should I consider when selling goods and services?

The main ways to take payment from customers are as follows:

  1. Accepting cash; this will usually only be feasible if you interact with a customer face to face. See Q&A 7 for what to do if you think you have received money.

  2. Taking card payments directly. See Q&A 8 and following for further information about things to consider when accepting card payments.

  3. Allowing customers to pay through mobile devices (eg ApplePay). You should speak to your payment service provider about this; see Q&A 8 for further information about entering into an arrangement with a payment service provider.

  4. Allowing customers to pay through secure internet payment sites (eg PayPal, Square). These providers are an alternative to card payments. A customer can usually pay by loading money into his online account and authorising the payment provider to transfer it to your account, or by authorising the payment provider to take money directly out of his bank account or card and transfer it to you. Each of these payment providers will have terms which you should check carefully before signing up as a merchant.

  5. Customers to set up a direct debit; this is generally used by businesses selling or services on a rolling basis via a subscription. See Q&A 12 and following for further information about things to consider when taking payment by direct debit.

  6. Taking cheque payments (albeit this is less common nowadays). If you are considering accepting payment by cheque, you should bear in mind that if a cheque bounces and a customer refuses to pay by other means (or if the customer disappears), there is no easy way to recover what you are owed and your only option may be to take legal action against the customer. If the customer is in financial difficulty or has absconded, you may be unable to recover your money even if you do pursue legal action. It is therefore advisable only to accept cheque payments if you can cash the cheque before you provide or perform services.

You should note that offering credit to customers (such as a monthly payment plan, in instalments) requires you to be authorised by the and thereafter follow particular rules. Offering credit to customers is a complex process and advice about it is beyond the scope of this service; if you are considering this you should seek specialist legal advice. For access to a specialist lawyer in a few simple steps, you can use our Ask a Lawyer service.

Q7:What should I do if I suspect that a customer has given me counterfeit money?

Being presented with banknotes or coins you suspect are is rare but serious, and you should make sure that your know how to properly respond in this situation. When you receive money which you suspect may be , you should take the following steps:

  1. Retain the potentially money if it is safe to do so:

    It is a crime to pass on money to anyone else except the police – even the original owner of the note or coin. This means that you should not give the original owner back his note or coin. That said, you should ensure your comply with your business' policy on dealing with workplace violence if the customer becomes aggressive. You have a duty to protect your at work and in some cases it may be necessary for you or your to return the money to the customer to ensure their safety.

  2. Explain that the customer cannot use the potentially money and must provide legal tender to complete the transaction:

    You should make it clear to the customer that he is not free to leave with anything he was attempting to buy. This is because the suspected notes or coins must be turned over to the police and so cannot be accepted as payment. However, as above, you should instruct your to comply with your policy on dealing with workplace violence if the customer becomes aggressive.

  3. Provide the customer with a receipt for the confiscated notes or coins:

    Although you must confiscate the potentially money and turn it over to the police, it is possible that on evaluation the notes or coins are found to be genuine. Explain to the customer that if this is the case, he can use the receipt to get his money back from the police.

  4. Call the police to report the incident:

    You must contact the police as soon as reasonably possible to notify them that you have notes or coins which you suspect may be . Failing to do so is a crime. The police will arrange for someone to come and collect the notes or coins, or they may ask you to come to a police station and hand them over in person.

If the customer has already left your premises by the time you begin to suspect that the money she gave you is (for example you spot it as you are cashing up at the end of the day), you still have to contact the police and turn over the notes or coins as described above. This might mean that you have lost money. If you can identify the customer who gave it to you, you can pursue her for payment, but usually, you will have to fall back on any stock insurance you may have.

Q8:What will I need to do before I can accept card payments?

In order to accept card payments, you will need a and a payment gateway. To set up a and you must go through a payment service provider (ie a bank, or a financial service such as Worldpay). Getting these arrangements in place can take time so you should make sure you begin this process in plenty of time.

You will generally have to pay a joining fee to cover the costs of setting up and a certain amount per transaction (often called fees). See Q&A 9 for information about passing on fees to your customers.

It is important to ensure that you have read the agreements that you enter into with your payment service provider. When you sign up for a merchant bank account, you will be entering into a contract and therefore bound by the provider's terms and conditions. A term of the agreement will almost certainly be that the bank or provider can hold back paying you funds from any sale that they believe is in , for example, if they suspect you are accepting card payments on behalf of a , or if you are selling that the bank or provider prohibits.

See Q&A 10 for information about what to do if you receive a chargeback request from a customer's card issuer.

Note that due to the introduction of strong customer authentication regulations, customers purchasing online must provide two forms of identifying details when making a payment (identifying details include passwords or pin codes, possession of a payment card or mobile phone, and biometric details like fingerprints). The obligation to require the extra information usually falls on payment service providers (PSPs) such as banks and card processors, and not all transactions will require strong customer authentication, such as one-off purchases under £30.

Q9:Can I charge customers additional fees if they pay by card?

This depends upon whether the customer is an individual or a .

In most cases you are not allowed to charge an additional fee (surcharge) to a because he chooses to pay with a credit card, debit card, e-money, PayPal or payment method other than cash or cheques. The exception to this is if your bank or the customer's bank is not located in the ; in that situation, you can usually charge back to the the cost of receiving the payment. See for information about the rules on accepting non- registered payment cards.

You can, however, charge that are using a commercial card (eg a corporate credit card that someone might use for business purchases on expenses ) for the actual costs you incur in the card . The costs you are allowed to charge for will include direct costs incurred in receiving the payment (such as merchant service charges or transaction fees), but not general overhead costs or indirect costs (such as setting up your machine or training). Note that it is important you ensure that the card being used is a corporate card, not a personal card that a business person happens to be using for expenses, as the ban on surcharges applies to the type of card rather than the type of customer.

You are permitted to charge customers booking or handling fees on transactions, provided you charge the same fee to all customers regardless of their payment method. However, you must ensure your sales information is clear and includes all important information that a should know before they proceed with the transaction. You must also obtain ' express consent to any additional fees before they buy something from you (you cannot 'pre-tick' a box for a customer to incur additional charges).

Q10:What should I do if I get a chargeback request from the bank?

A chargeback request is where a customer asks his card issuer or provider to reverse a transaction on his credit or debit card. This might be for a number of reasons, including the following:

  1. products he has bought are damaged, faulty or not as described;

  2. products he bought have not arrived;

  3. the customer did not authorise the transaction or there has been a error;

  4. the customer has cancelled a booking or reservation, but his account has still been debited; or

  5. the transaction has been processed more than once.

Chargeback can be used in relation to both credit and debit card transactions and can apply to all and services, however they were purchased. If successful, it means that the amount the customer paid for the or services will be taken from your account and refunded to the customer. However, where the value of the or services purchased is over £100 and was made using a credit card, the customer has alternative legal protection under section 75 of the Credit Act 1974, meaning that he can make a claim for any loss suffered directly from the credit card ; this is a separate and different process.

The first that you as a merchant will know about a chargeback request is likely to be a letter from the card issuer. Usually, this will request that you provide proof to defend the chargeback within 14 days (this will be described as a Request for Information); this could include proof of how the transaction was authorised, or proof that you posted the .

It is important that you respond with any proof within the requested time period; the card issuer is under an obligation to either resolve the dispute or refund the customer within that time. If the card issuer has to issue a refund, this will be done by debiting the amount of the transaction from your account.

Chargebacks are a helpful way for customers to easily be compensated in the event of fraud or mistakes on the merchant's part, but in some situations the system can be abused and you could find yourself in the position of having provided or services as agreed but also having to refund a customer. In addition, too many chargeback requests may affect your standing with your bank or payment service provider and in some situations, they may refuse to let you continue using their services.

See Q&A 11 for information on ways in which you can guard against chargeback.

Q11:How can I guard against a chargeback?

Ways to guard against chargebacks include:

  1. ensuring you have the appropriate software set up to prevent online fraud;

  2. making sure that you keep records of all transactions and proof of postage for at least a year;

  3. ensuring that are described as fully and as accurately as possible;

  4. ensuring that are sent in appropriate, hard-wearing packaging;

  5. ensuring that the name that will appear on customers' statements is easily recognisable; and

  6. responding to any Requests for Information that you receive promptly and with as much information as possible.

Q12:How do I set up a direct debit arrangement with my customer?

If you want to use direct debit to take payments from customers you must be accepted on to the direct debit scheme or access direct debit services through a facilities management provider which will collect and/or administer direct debits on your behalf. You should discuss this with your bank, as you will need them to sponsor you as a direct debit service user if you want to operate a direct debit system yourself. Your bank will carry out the required checks to make sure you are eligible to be accepted on to the scheme and will discuss the rules and procedural requirements with you.

Once you have been accepted on to the direct debit scheme you must submit your payment data to the service (amount of payment, bank account numbers, sort codes etc). You can then begin setting up direct debit instructions to collect payments from your customers. Your bank will give you all the information you need.

For further information on what to do if a direct debit payment from a customer does not come through, see Q&A Q&A 13.

Q13:What can I do if my customer's direct debit payment does not come through?

Direct debit is generally a reliable method of collecting payments from your customers, but problems can still arise.

If your customer's direct debit payment does not come through, you can ask your bank or payment service provider to trace it and tell you what has happened. There could be various causes, for example:

  1. Your customer has insufficient funds in his account

    If this happens, you should contact your customer to ask that he transfers you the money immediately. Depending on the terms of your contract with the customer, you might be able to suspend the services you offer him until he has paid you in full.

  2. Your customer has cancelled his direct debit

    Customers can cancel their direct debit payments at any time. If they do this you will be unable to collect money from the account without obtaining the customer's authority.

    You should contact the customer to check whether the direct debit has been cancelled by mistake, or whether he will be making separate arrangements to pay you. Depending on the terms of your contract, you may stop providing services until the customer pays you what you are owed.

    If the customer has done this deliberately because you are in a dispute with him, see Resolving disputes proactively for further information about what to do.

  3. Your customer has switched banks

    This should not cause a problem for you because of the , which was launched by the government in 2013. If your customer switched banks using this service (which is very likely) then their payments and direct debits will be moved to their new account. You will not be affected and should receive direct debit payments from your customer as usual.

    If there is a problem with the direct debit, you should contact the customer to let him know so that he can resolve this with his bank. You should ask him to pay you what you are owed as soon as possible.

  4. Your bank or your customer's bank made an error when the transaction

    First, you must notify your bank of the error and ask your customer to notify his bank. You should do this as soon as you become aware of the mistake, and certainly no more than 13 months after the debit date.

    1. If the customer's bank is at fault they must refund the amount to your customer. The customer can then pay you what you are owed.

    2. If the customer's bank can prove that it the transaction correctly, then it is your bank who is responsible for the mistake. Your bank must immediately pay you what you are owed, or resend the direct debit request to your customer's bank as appropriate.

Whilst it is usually possible to recover payment for or services that have not been paid for by pursuing legal action, this will be costly and time-consuming. To prevent any such problems arising in the first place, you should take advance payments from your customers where possible. That way, if a payment does not come through you will not be out of pocket, because you have not yet provided the or service.

See Charging interest on late payments for information on whether you can charge interest on late payments, and how much interest you can charge.