VATRESNI3800 - How the scheme works: Invoicing under the direct reclaim system
Retailers operating the direct reclaim system
must comply with legal invoicing requirements set down in the VAT Regulations
1995. Under the system, the retailer “sells” the goods to the refund company at
the point of sale. The retailer accounts for output tax on this supply to the
refund company who reclaim the input tax. The retailer must produce an
acceptable “VAT invoice” to provide evidence of the supply. If the retailer
does not issue a separate VAT invoice for this transaction a copy of the refund
company’s approved version of the VAT 407(NI) can be used but it is essential that it
includes specific details required by law. The details required depend on the
value of the consideration for the supply.
Regulation 14 of the VAT Regulations 1995 lists the particulars which must be
included. Where the consideration exceeds £250, the invoice or VAT 407(NI) must
contain all the particulars listed. The VAT 407(NI) form does contain most of
the particulars detailed in regulation 14 but there are a couple of notable
omissions, for each description:
- the taxable amount excluding VAT; and
- the unit price.
Where the consideration for a supply is £250
or more, retailers may (provided the customer agrees) issue a modified VAT
invoice showing the VAT inclusive amount instead of the VAT exclusive values.
However, all other details as set out in regulation 14(1), such as the unit
price, must be included. Information that must be shown is contained in Notice 700 in the section
headed ‘VAT invoices: general rules’.
We have no discretion to vary the invoicing requirements which originate in EU
law. If these additional details are not included on the VAT 407(NI) or
separate invoice, the retailer may be liable to a civil penalty under section69 of the VAT Act 1994.
However, regulation 16 allows for simplified invoices to be issued where the
consideration does not exceed £250.