Date of issue: 1st December 2003

Prepare Now for Changes to Vat Invoicing

New rules regarding the type of information to be incorporated in VAT sales invoices come into force from 1 January 2004 as part of the new EC Invoicing Directive.

In view of the low key launch of these changes to UK invoicing practice, Chartered Accountants Clement Keys, Birmingham is highlighting the issue so that VAT registered businesses can update their systems in good time.

"All VAT registered businesses will have to comply with the new rules, which may involve them updating or making improvements to their computer software, so it is important that they start the process now," says Steve Simmonds, Director of VAT services at Clement Keys, Birmingham.

The changes relate to the content of VAT sales invoices and the new ruling follows agreement by EU member states to standardise the format of sales invoices. The four key revisions are:

· It is no longer necessary to state the type of supply
· VAT no longer has to be shown at each rate
· A unit price must be shown for both goods and services
· The sterling equivalent of the invoice total is no longer required

Clement Keys, Birmingham understands that Customs and Excise will not insist on the removal of information relating to the type of supply, varying rates of VAT and sterling equivalent totals. Businesses which incorporate this information in their invoices may continue to do so for the time being.

However, businesses must comply with the mandatory requirement to show unit prices for goods and services by 31 December 2004 at the latest.

"It is common practice for UK businesses to show a unit price for the goods they are providing as well as a total sales amount, so this is unlikely to cause them many problems," adds Steve Simmonds.

"What they will need to review carefully is the unit price they show for the supply of services, as Customs and Excise have indicated that they expect to see an hourly rate or a 'rate for the job' on all VAT sales invoices."

For some businesses complying with the new rules will mean a complete overhaul of their invoicing procedures and possibly a redesign and reprinting of sales invoices. Since this could take some time to implement Clement Keys, Birmingham is urging SMEs to act now and avoid a major headache next year.