Invoicing when you're not VAT registered

If you're not VAT registered, you invoice without VAT. Your invoice shows your price as one total: no VAT line, no VAT rate, no VAT number and no "including VAT". Under the VAT Act 1994, HMRC can collect any amount an invoice shows as VAT from whoever issued it, registered or not.

When you have to register at all is covered in our guide to VAT registration for freelancers. This one is about the invoice.

What your invoice needs

gov.uk's list of what an invoice must include is short:

• a unique invoice number
• your name or business name, address and contact details
• your client's name and address
• a clear description of the work
• the date you did the work and the date of the invoice
• the amount for each item and the total due

The same list mentions the VAT amount "if applicable". If you're not registered, it isn't, so it stays off.

A sole trader puts their own name on the invoice, plus any business name they trade under and, if they use one, an address where legal documents can reach them. A limited company uses its full name exactly as it appears on its certificate of incorporation, and if it names one director on the invoice, it names them all. Add payment details and a due date too. They aren't on the list, but your client can't pay without them (more in invoices that get paid).

What it must never show

Leave off anything that says or suggests there's VAT in the price. The penalty rules cover an unregistered person's invoice that shows an amount as VAT or as including VAT, so a phrase like "price includes VAT" counts too.

Get it wrong and it lands on both of you. HMRC can recover the amount shown as VAT from you and charge a penalty on top. Your client can't use the invoice to reclaim anything. HMRC's VAT guide says only a VAT-registered person can issue a VAT invoice, and a client who knowingly reclaims VAT on one from an unregistered supplier commits an offence.

The same goes for the number. Never put a VAT number on an invoice unless HMRC issued it to you. Your Unique Taxpayer Reference and your company number aren't VAT numbers, so they don't go in that box either.

Costs you pass on catch people out. If you pay VAT on a stock photo licence for a client, you can't reclaim it, so it's part of what the licence cost you. Bill the full amount as one line, with no VAT shown.

Adding a "not VAT registered" line

No law requires one, and an invoice without it is still valid.

It's worth adding anyway. If a client's accounts team is looking for a VAT number, a missing one can look like a mistake. One line under the total answers the question first:

Not VAT registered. No VAT is charged on this invoice.

Keep it in words, and don't add a row reading "VAT 0%". Zero per cent is a real VAT rate, the one registered businesses use for zero-rated goods and services. On your invoice it suggests you're registered and zero-rating the work, which you aren't.

When a client asks for your VAT number

Tell them you don't have one because you're not VAT registered, so your invoices carry no VAT and the total is the full amount due. Below the threshold, registering is optional.

If their supplier form has a VAT number box, write "not VAT registered" in it. Don't leave it blank or put another reference in it.

Clients can check any number they're given with gov.uk's Check a UK VAT number service, which shows the name and address of the business it belongs to. A number that isn't yours gets caught there.

Crossing the threshold

You have to register once your taxable turnover for the last 12 months goes over £90,000. That's a rolling total you count at the end of every month, not your tax year. You also have to register if you expect to go over it in the next 30 days alone. The threshold has changed before, so check the current figure on gov.uk on the day.

Crossing it changes your invoices from a fixed date, your effective date of registration. Go over the rolling total in July and you're registered from 1 September, the first day of the second month after. Expect to go over in the next 30 days and you're registered from the day you realised.

From that date you owe VAT on what you sell, whether or not you charged it. VAT Notice 700/1 says so, and it holds when you register late too. If your invoices still show your old price with no VAT, the VAT comes out of that price.

Invoicing while you wait for your VAT number

HMRC checks your application before it sends your number, and asks you not to chase until 40 working days have passed (section 4.5). Your effective date can pass before then, so you can be VAT registered with nothing to print on an invoice.

HMRC's rule for the gap is section 5.1 of VAT Notice 700/1, and gov.uk's registration guide works it through. In order:

1. Keep records and account for VAT from your effective date, not from the day your number arrives.
2. If you want the client to bear the VAT, raise your price to cover it and tell them why.
3. Invoice that amount as one total. Don't show VAT as a separate item or print a VAT number you haven't been given.
4. Tell your VAT-registered clients that VAT invoices will follow.
5. Once your number arrives, send those clients VAT invoices within 30 days, with the VAT shown separately.

gov.uk's example is a £100,000 contract. The supplier tells the client they're adding 20% and invoices £120,000, with no VAT shown. When the number comes through, they reissue the invoice with the £20,000 of VAT set out. The client pays nothing extra and now holds a VAT invoice to reclaim with.

A note on the interim invoice, such as "VAT registration applied for, VAT invoice to follow", explains the missing number without showing an amount as VAT. Whether you can add 20% to a price you've already agreed depends on your contract. If the client won't pay it, you still owe the VAT, so it comes out of your fee. For new work, say in the quote whether the price includes VAT.

Work either side of your registration date

Not every invoice you send after your effective date carries VAT. What counts is when the supply happened, which HMRC calls the tax point. For services it's normally the date the work is finished, apart from invoicing, though a payment received earlier can bring it forward.

So a job finished before your effective date normally carries no VAT, even if you invoice it a week later. A job finished after it does, even if you agreed the price months ago. Retainers, staged payments and deposits follow their own rules: if one straddles the date, ask an accountant before the invoice goes out.

The bottom line

Not registered means no VAT anywhere on the invoice. One plain sentence saying you're not VAT registered answers the VAT number question before it's asked. Watch your rolling 12-month total. Once you've applied, invoice the VAT-inclusive price as one figure until your number arrives, then send the VAT invoices within 30 days.