Further rules on the format of VAT invoices are being introduced from 1 October 2007, to bring the UK into line with EU legislation.

HMRC have committed to a "light touch" toward penalties in the first year except in cases of serious non-compliance.

A key change is that VAT invoices will have to bear a number that is not only unique but sequential.

HMRC accept that businesses may still use more than one invoice series (e.g. for separate business units or divisions), that new businesses may not wish to start with invoice number 1, and that some businesses use a mixture of letters and numbers to identify invoices.

The intention seems to be to minimise the number of businesses that have to make system changes to meet this rule.

Businesses making particular types of supply, however, may have to make further changes if they are:
using the margin scheme for second-hand goods, works of art, antiques and collectors items;
involved in making travel related supplies that fall within the scope of the Tour Operators Margin Scheme;
involved in intra EC supplies of goods and services; or
making supplies where the customer accounts for the VAT.

There will be a requirement to insert a statement clarifying the VAT treatment applied. For example, an antiques or other dealer will have to include a legend on the invoice to show that the invoice is for a supply subject to a second-hand scheme.

This could be as simple, however, as a legend stating:
"this is a second-hand margin scheme supply"; or
"this invoice is for a second-hand margin scheme supply".

For more information and guidance on other types of supply please see VAT Info Sheet 10/07 available to download from the HMRC website, here.