How to Charge VAT on Invoices

VAT invoices show how much VAT was paid.

Value Added Tax (VAT) is a type of consumer tax levied in Europe. A VAT invoice is an invoice issued to buyers that shows information the buyer needs in order to claim the VAT paid back from the government. There are very specific requirements for what must be shown on a VAT invoice, including the full name, address and VAT number of the entity who supplied the goods or services. Correct VAT calculation on invoices is essential for seamless operations and good record keeping.

Instructions

1. Record the unit price of the item, excluding VAT, on the receipt. The unit price is the cost of one item.

2. Record the quantity purchased.

3. Record the VAT rate.

4. Convert the VAT rate to a decimal. For example, if the VAT rate is 20 percent, the decimal equivalent is found by moving the decimal point two places to the left: 20 percent becomes .20.

5. Multiply the decimal you calculated in Step 1 by the price of the item to get the VAT amount. For example, if the price of the item is £100 then the VAT would be .20 x £100 = £20. Record this amount on the receipt.

6. Add the amount you calculated in Step 5 to the price of the item to get the total amount paid. In the above example, the total price paid would be £120. Record this amount on the receipt.

Tips & Warnings

• If you offered a cash discount on an item, you should clearly state that on the VAT receipt.

• If you sell an item that is zero-rated or exempt from VAT, you should clearly state that on the VAT receipt.

References

• HMRC: VAT invoices: what they must show
• Irish Tax and Customs: Invoicing