His Majesty’s Revenue and Customs (HMRC) is the tax authority in the United Kingdom (UK), which collects taxes and ensures people and businesses follow tax laws. HMRC ensures that businesses meet their tax responsibilities, such as paying the right amount of value-added tax (VAT) and income tax.

HMRC has specific rules around invoicing to help businesses stay VAT-compliant and maintain accurate records. Invoices must include certain details, such as the business’s information and how much VAT is included, if applicable. Following HMRC’s guidelines helps businesses avoid fines, audits, and other compliance issues.

Below we’ll explain what businesses need to know about HMRC invoices, such as what invoices must include, how to create one using accounting software, how to correct any errors that occur, and how to store them properly.

What’s in this article?

• What information needs to be included on an HMRC-compliant invoice?
  
• How to create an HMRC invoice using accounting software
  
• What are the rules for invoicing international clients?
  
• How to correct errors on an HMRC invoice
  
• How to store and retrieve HMRC invoices for tax purposes
  

What information needs to be included on an HMRC-compliant invoice?

In order for an invoice to comply with HMRC’s guidelines, it must include the following information:

• Your business’s details: The name of your business, along with its address and contact information
  
• The customer’s details: The name and address of the customer you’re invoicing
  
• The unique invoice number: A reference number for identification
  
• The invoice date: The date the invoice is being issued
  
• A description of the goods or services: A clear and accurate description of the goods or services provided
  
• The supply date: The date that the goods or services were delivered, which might be different from the invoice date
  
• The amount(s) charged: The amount(s) your business is charging the customer, excluding VAT
  
• The VAT information (if your business is VAT-registered): Your VAT registration number, the VAT rate applied to the goods or services, and the amount of VAT charged
  
• The total amount including VAT: The final amount that the customer needs to pay, including VAT
  

How to create an HMRC invoice using accounting software

Accounting software can speed up the process of creating invoices for customers. Here’s how to create an HMRC invoice with accounting software.

Set up your business profile

Set up your accounting software with all your business details, including the business’s name, address, contact information, and VAT registration number (if VAT-registered). Most software platforms have a “Settings” or “Company Profile” section where you can enter this information. This data will automatically populate on all invoices you generate.

Add the customer’s information

Go to the “Customers” or “Clients” section of your software, and add the customer’s details – name, address, and contact information. This information will automatically populate on invoices as they’re generated.

Create a new invoice

Go to the “Sales” or “Invoices” section, and select “Create New Invoice” or a similar option. The software will open a new invoice template that will have required fields for you to fill out.

Enter the invoice details

Enter a unique invoice number. Note that invoice numbers should be sequential and not repeated. Also, depending on the software, these numbers might be automatically generated. Add the invoice date, which is the date you issued the invoice, and the supply date, which is when the goods or services were provided. If these dates differ, make sure to include both.

Input a description of the goods or services

In the “Item” or “Description” field, provide a detailed description of the goods or services that were provided. Be as specific as possible. Include the quantity, unit price, and any other relevant details.

Specify the pricing and VAT

Enter the price per product or service, and the total amount charged for each line item. If your business is VAT-registered, select the correct VAT rate. The software should automatically calculate the VAT amount based on the rate applied. Show the total amount before VAT, total VAT amount, and total amount including VAT. Make sure to include your VAT registration number on the invoice, as well.

Review the invoice for compliance

Check that all required information is displayed correctly on the invoice. This includes the details for your business and the customer, the invoice number, invoice and supply dates, description of the goods or services, amount you’re charging the customer, VAT breakdown, and VAT registration number, if applicable.

Save and send the invoice

Once you’ve reviewed the invoice for accuracy and compliance, save it in the software. Most accounting software allows you to email the invoice to the customer directly or download it as a PDF to send manually. Keep a copy for your records.

Record and track payments

Use the software to track the status of the invoice (e.g., sent, viewed, paid, overdue). This helps manage cash flow and ensures follow-up on unpaid invoices. Many accounting tools also offer automated reminders for unpaid invoices.

Maintain your digital records

HMRC requires VAT-registered businesses to maintain digital records of their invoices for at least six years. Accounting software is typically set up to store this information automatically for future reference or in case of an audit.

What are the rules for invoicing international clients?

When invoicing international clients, you must adhere to both your country of residence’s regulations and those of your client’s country. Some countries might have specific requirements for what to include on the invoice, how to format it (e.g., whether electronic invoices are accepted), and what language it should be in. While there are region-specific requirements, here’s an overview of what most international invoices must include.

• Your business’s details: Your business’s name, address, contact details, and VAT or tax identification number, if applicable
  

• The client’s details: The client’s full name, address, contact information, and VAT or tax ID, if applicable

• A description of the goods or services:

  • A detailed description of the goods or services rendered
    
  • If you’re shipping physical products, Harmonized System (HS) codes to classify the goods for customs purposes
    

• The currency and payment terms:

  • The total amount due
    
  • If VAT applies, the applied VAT rate (though most goods or services sold from the UK to customers outside of the UK are zero-rated for VAT)
    
  • The currency in which the invoice is issued (e.g., GBP, USD, EUR) and any exchange rates used
    
  • The payment terms, including the due date, accepted or preferred payment methods (e.g., wire transfer, PayPal), and any late payment penalties
    

• The invoice number and applicable dates:

  • Invoice number
    
  • The date the invoice was issued
    
  • The date the goods or services were provided, if different from the issued date
    

• The shipping and delivery details:

  • The shipping method and who bears the shipping costs (e.g., CIF terms)
    
  • Tracking numbers for shipped goods, if applicable
    

• Any additional information:

  • Any relevant terms and conditions related to the sale, such as return policies, warranties, or service agreements
    
  • A point of contact for any queries related to the invoice
    
  • If shipping goods internationally, information on who is responsible for customs duties and import taxes (this is typically the customer)
    

Maintain digital copies of all invoices for your records and potential audits. Use accounting software that supports international invoicing to help you create compliant invoices and keep accurate records for future reference and potential audits.

How to correct errors on an HMRC invoice

Whether it’s a minor typo or a major mistake affecting the VAT amount, addressing errors on issued invoices promptly can prevent complications with both your customer and HMRC. Here’s how to do it.

Identify the error

Determine the nature and extent of the error. Common issues include mistakes when charging customers, applying VAT rates, entering customer details, and dating invoices.

Issue a credit note

A credit note effectively cancels all or part of the original invoice. It should reference the original invoice number and date, and it should detail the error, while showing the corrected amount(s). The credit note must include your business’s details, the customer’s details, a unique credit note number, and the information you are adjusting. Provide the credit note to your customer to officially acknowledge both your error and the correction, including the steps you’ve taken to correct the situation.

Issue a new invoice (if necessary)

If the transaction is still valid but requires corrected information, issue a new invoice with a new invoice number. To maintain a clear audit trail, note on the new invoice that it is replacing the original invoice. Make sure the new invoice includes all mandatory information as required by HMRC.

Adjust your accounting records

Reflect the changes in your accounting software or ledgers. Ensure that the original invoice, credit note, and new invoice are all recorded. Sign in and amend it to reflect the corrections.

Retain all your documentation

HMRC requires that businesses keep all invoicing records for at least six years for their reference and in case of an audit. This includes original invoices, credit notes, and corrected invoices.

Consider any VAT return implications

If the error affects a VAT period for which you’ve already submitted a return, you might need to adjust your next VAT return. If it was a deliberate error (i.e., you sent HMRC information you knew was incorrect), you’ll need to notify HMRC directly. Here’s how these situations typically work.

• Errors under £10,000: You can adjust the error on your next VAT return.
  
• Errors between £10,000 and £50,000: You can adjust the error on your next VAT return if the error is below £50,000 and doesn’t exceed 1% of your turnover.
  
• Errors over £50,000: You must notify HMRC directly.
  

Generally, you must make corrections within four years of the original error.

How to store and retrieve HMRC invoices for tax purposes

To store HMRC invoices for tax purposes, you should keep organised records for at least six years. VAT-registered businesses must store records digitally. Ensure that all invoices are clearly labelled with details such as the date, invoice number, and client name. Also, back up electronic records regularly to prevent data loss.

Accounting software or secure cloud storage can help with digital record storage. Stripe Invoicing allows businesses to create, send, and track invoices directly from its platform, in addition to providing secure digital records of all invoices. Stripe integrates with popular accounting software such as QuickBooks and Xero to sync invoices and payments. It also lets you create a unified financial management system from which you can report taxes, reconcile accounts, and maintain HRMC-compliant invoicing practices.