Learn from side-by-side comparisons showing the difference between HMRC-compliant VAT invoices and common mistakes.
This page shows real invoice examples comparing correct HMRC-compliant VAT invoices with common mistakes. Each example includes:
Study these examples before creating your own VAT invoices to ensure full compliance.
The most common VAT invoice type for professional services, showing proper formatting of all HMRC-required fields.
| Description | Qty | Rate | Amount |
|---|---|---|---|
| Management Consultancy Services - October 2024(Standard 20%) | 40 | £150.00 | £6000.00 |
| Travel Expenses (London-Manchester)(Standard 20%) | 1 | £120.00 | £120.00 |
| Description | Qty | Rate | Amount |
|---|---|---|---|
| Services | 1 | £6120.00 | £6120.00 |
Sequential alphanumeric format: INV-2024-0042
Simple number without prefix: 42
HMRC requires unique, sequential invoice numbers that cannot be duplicated. A prefix (like "INV-") combined with year and sequence number ensures uniqueness across years. Simple numbers like "42" can easily be duplicated in different years, violating HMRC requirements and making tracking difficult.
GB prefix with proper formatting: GB 123 4567 89
Numbers only without country prefix: 123456789
UK VAT numbers MUST include the "GB" country code prefix. The official HMRC format uses spaces (GB XXX XXXX XX) for readability and validation. Missing the GB prefix makes the invoice non-compliant and can cause issues with customer VAT reclaim processes.
UK date format DD/MM/YYYY: 20/10/2024
US date format MM/DD/YYYY: 10/20/2024
UK invoices must use the British date format (day/month/year). Using the American format (month/day/year) causes confusion and may lead to incorrect VAT period reporting. For example, 10/20/2024 could be misread as 10th August instead of 20th October.
Specific description with context: "Management Consultancy Services - October 2024"
Vague generic description: "Services"
HMRC requires clear, detailed descriptions of goods or services supplied. Vague terms like "Services" are not acceptable for VAT invoices. Detailed descriptions help with VAT inspections, disputes, and ensure the correct VAT rate is applied. They also help customers understand what they're paying for.
VAT rate clearly shown for each line item: "Standard 20%"
No VAT rate information displayed on line items
Each line item must show which VAT rate applies. This is crucial when invoices mix different VAT rates (20%, 5%, 0%, exempt). Displaying rates prevents confusion, helps with VAT returns, and is required for HMRC compliance. The total section must also clearly show the VAT percentage.
Complete address with postcode on separate lines: "123 Business Street London SW1A 1AA"
Incomplete single-line address: "123 Business Street, London"
HMRC requires your complete registered business address including full postcode. Multi-line formatting improves readability and meets postal standards. Missing postcode or incomplete address can invalidate the invoice. The address must match your VAT registration details.
Companies House number displayed: "12345678"
Company number missing from invoice
While not mandatory for VAT compliance, displaying your Companies House registration number (if you're a limited company) adds legitimacy and helps customers verify your business. It's considered best practice and is legally required on company letterheads and certain documents.
Full customer details including address and VAT number if applicable
Minimal customer information (name only)
VAT invoices must include the customer's full name and address. For B2B transactions, including the customer's VAT number helps them reclaim VAT and is required for certain supplies. Complete customer details are essential for HMRC compliance and audit purposes.
Specific payment terms: "Net 14 days"
Vague payment terms: "2 weeks"
Clear, professional payment terms prevent disputes. "Net 14 days" is industry-standard terminology that specifies exactly when payment is due from the invoice date. Vague terms like "2 weeks" can cause confusion about whether it means calendar days or business days.
Proper UK bank format: Sort Code "20-00-00", Account "12345678"
Missing or improperly formatted bank details
UK bank details should follow standard format: 6-digit sort code (XX-XX-XX) and 8-digit account number. Proper formatting helps customers make accurate payments and reduces errors. Including bank name provides additional verification and confidence.
Demonstrates how to handle invoices with different VAT rates (20%, 5%, 0%) on the same document.
| Description | Qty | Rate | Amount |
|---|---|---|---|
| Standard Building Work - Extension(Standard 20%) | 1 | £5000.00 | £5000.00 |
| Energy-Saving Insulation Installation(Reduced 5%) | 1 | £2000.00 | £2000.00 |
| Solar Panel Installation (Materials)(Zero 0%) | 1 | £3000.00 | £3000.00 |
| Description | Qty | Rate | Amount |
|---|---|---|---|
| Building Work(20%) | 1 | £10000.00 | £10000.00 |
Each line item shows its specific VAT rate: Standard 20%, Reduced 5%, Zero 0%
All items lumped together with single 20% VAT rate
When an invoice contains items with different VAT rates, you MUST show the rate for each item separately. Applying a single VAT rate to items that qualify for different rates (like energy-saving materials at 5% or 0%) means overcharging the customer and incorrectly reporting VAT to HMRC.
Detailed breakdown showing VAT calculation for each rate: "£5,000 @ 20% = £1,000 | £2,000 @ 5% = £100 | £3,000 @ 0% = £0"
Single total VAT amount with no rate breakdown
For mixed VAT rate invoices, HMRC requires a breakdown showing the subtotal and VAT amount for each rate. This must be clearly displayed in the totals section or notes. Without this breakdown, it's impossible to verify correct VAT treatment and the invoice may be rejected.
Specific descriptions that justify the VAT rate: "Energy-Saving Insulation Installation" (clearly qualifies for 5%)
Generic description: "Building Work" (doesn't indicate special VAT treatment)
When using reduced or zero VAT rates, the item description must clearly show why that rate applies. "Energy-Saving Insulation Installation" justifies the 5% rate, while "Building Work" is too vague. Descriptions must be specific enough for HMRC to verify the correct rate was applied during an inspection.
Correct total: £1,000 (20%) + £100 (5%) + £0 (0%) = £1,100
Incorrect: £10,000 × 20% = £2,000 (overcharging by £900)
Calculating VAT incorrectly by applying a single rate to all items when they qualify for different rates results in overcharging customers and reporting too much VAT. In this example, using 20% on everything charges £2,000 instead of £1,100 - a £900 error that must be corrected and could trigger HMRC penalties.
Notes section includes VAT breakdown for audit trail
No supporting information about VAT calculation
Including a clear VAT breakdown in notes or footer provides an audit trail for both the customer and HMRC. This documentation is especially important for mixed-rate invoices and helps prevent disputes. It shows professional accounting practices and makes VAT return preparation easier.
If you work in construction, you also need to understand CIS (Construction Industry Scheme) deductions. Our CIS examples guide shows the #1 mistake that costs contractors money- calculating deductions before VAT instead of after.