Proforma Invoice vs Tax Invoice
Understanding when to use each type and their legal implications in the UK.
Quick Comparison
| Feature | Proforma Invoice | Tax Invoice |
|---|---|---|
| Purpose | Quote or estimate | Request for payment |
| Legal status | Not a valid tax document | Legal tax document |
| VAT reclaim | Cannot be used | Valid for VAT reclaim |
| Payment expectation | Before work/delivery | After work/delivery |
| Numbering | Separate sequence | Main invoice sequence |
What is a Proforma Invoice?
A proforma invoice is a preliminary document that looks like an invoice but is not a demand for payment. It's essentially a detailed quote or estimate that shows the customer exactly what they'll pay when they proceed.
A proforma invoice must be clearly marked as such. Common wording: "THIS IS NOT A VAT INVOICE" or "PROFORMA – NOT A TAX INVOICE".
When to Use a Proforma Invoice
- Deposits – Requesting payment before work begins
- International sales – For customs and shipping purposes
- Budget approval – Helping customers get internal sign-off
- Pre-orders – Before goods are ready to ship
- New customers – When you require payment upfront
What is a Tax Invoice?
A tax invoice (or VAT invoice) is a legally binding document that:
- Requests payment for goods or services already delivered
- Can be used by the customer to reclaim VAT
- Must contain specific information required by HMRC
- Creates a legal obligation to pay
The Workflow: Proforma to Tax Invoice
A common business workflow is:
- Send proforma invoice – Customer sees what they'll pay
- Receive deposit/payment – Customer pays based on proforma
- Deliver goods/services – Complete the work
- Issue tax invoice – Convert to proper invoice for records
Proforma Invoice Requirements
While there's no legal format for proforma invoices, they typically include:
- Clear "PROFORMA INVOICE" heading
- "THIS IS NOT A VAT INVOICE" statement
- Your business details
- Customer details
- Description of goods/services
- Prices and quantities
- Total amount (including indicative VAT)
- Validity period
Tax Invoice Requirements (UK)
A valid UK VAT invoice must include:
- Sequential invoice number
- Date of issue
- Your business name, address, and VAT number
- Customer's name and address
- Description of goods/services
- Quantity and unit price
- VAT rate(s) applied
- Total excluding VAT
- Total VAT amount
- Total including VAT
Common Mistakes
- Not marking proformas clearly – Customer may try to use for VAT reclaim
- Using main invoice numbers for proformas – Use a separate sequence (e.g., PRO-001)
- Forgetting to issue tax invoice – You must issue a proper invoice eventually
- Including VAT number on proforma – Some avoid this to prevent confusion
Easy Invoice Type Selection
With Experi, you can choose the invoice type when creating. Proforma invoices are automatically marked correctly and use a separate numbering sequence.
Try FreeFrequently Asked Questions
Can I convert a proforma to a proper invoice?
Yes, once work is complete or goods are delivered, you should issue a tax invoice. Reference the original proforma number for traceability.
Do proforma invoices affect my accounts?
No, proforma invoices should not be recorded as sales or income until you issue the actual tax invoice. They're for documentation only.
Can customers reclaim VAT from a proforma?
No, HMRC does not accept proforma invoices for VAT reclaim. The customer must have a proper VAT invoice.