The new rules relate to the information that must be shown by suppliers in certain circumstances, and also the way in which all VAT invoices should be numbered. It is a current requirement that all VAT invoices are issued with an identifying reference number. However, when the new rules come into force on 1 October 2007, this reference number will also need to form part of a unique and sequential numbering system.
Many VAT registered businesses already allocate numbers to their invoices in this way, so this aspect of the new rules will not have any real effect. Businesses which do not issue sequential invoice numbers, however, will have to update their systems in order to comply.
The new rules also mean that certain businesses will have to annotate their invoices to confirm the VAT treatment of the related supply. The types of businesses likely to be affected are:
· those using the VAT margin scheme for second-hand goods, works of art, antiques and collectors items;
· those involved in making travel related supplies that fall within the scope of the Tour Operators Margin Scheme;
· those involved in the intra EC supply of goods and services; and
· those making supplies where the customer accounts for the VAT
The VAT legislation sets out the details that need to be shown on a VAT invoice, and confirms that, to reclaim any VAT paid to a supplier, the claimant must be in possession of a valid VAT invoice. From 1 October 2007, invoices not complying with the new numbering rules will not qualify as VAT invoices.
The following are some of the example statements included in VAT Info Sheet 10/07 that HMRC say will be acceptable invoice narratives:
"This is a second-hand margin scheme supply" (margin scheme)
"This is a tour operators' margin scheme supply" (TOMS)
“This is an exempt supply” (intra-EU services)
"This supply is subject to the reverse charge" (intra-EU services)
"Zero rated intra-EC supply" (intra-EU goods)
Although HMRC has said that during the first year of the new rules, penalties for non compliance will only be issued in exceptional cases, we suggest it would be unwise for businesses to rely on this statement. VAT registered businesses should now ensure they meet the 1 October 2007 requirements.