Proforma Invoice vs Tax Invoice UK

Proforma invoice vs tax invoice: quick comparison

What is a proforma invoice?

A proforma invoice is a preliminary commercial document. It gives the buyer a detailed view of the proposed goods or services, price, delivery and payment terms before the final sales invoice is issued.

It can be used when a customer needs a detailed figure for approval, when advance payment is requested, or when goods need supporting information for international shipping. HMRC describes a proforma as a document against which payment may be invited, so “proforma” does not automatically mean that nobody can pay it.

When a proforma is useful

• Advance payment: show what will be supplied and the expected amount before work or delivery.
• Internal approval: give the buyer enough detail to obtain a purchase order or budget approval.
• International trade: provide values, shipping details and other information needed before the final commercial invoice.
• Details still being finalised: document the expected price while quantities, delivery or other terms remain provisional.

What is a tax invoice in the UK?

In UK guidance, the more precise term is VAT invoice. Only a VAT-registered business can issue one. It records a taxable supply and shows the VAT information the customer normally needs to reclaim input tax.

A VAT invoice is not valid merely because it says “tax invoice”. It must contain the details required for the applicable full, modified or simplified VAT invoice format. If you are not VAT registered, issue a normal sales invoice and do not charge VAT.

From proforma to final invoice

1. Prepare the proforma: describe the proposed supply, price, terms and validity period, then label it clearly.
2. Confirm what happened: check the final quantities, price, delivery and any payment received. These facts determine what belongs on the final invoice and may affect the VAT tax point.
3. Issue a new final invoice: give it the correct invoice number and required tax information. Keep the proforma as the preliminary record instead of overwriting it.

What to include on a proforma invoice

There is no single statutory UK layout for a proforma, but a useful document normally contains:

• a prominent “Proforma invoice” heading and “This is not a VAT invoice” statement;
• a clear reference and issue date;
• the seller’s and buyer’s names and contact details;
• descriptions, quantities, unit prices and expected totals;
• estimated VAT where relevant, clearly presented as preliminary;
• payment, delivery, shipping and validity terms that matter to the transaction.

What a full UK VAT invoice generally includes

The precise requirements depend on the invoice format and transaction. A full VAT invoice generally includes:

• a unique sequential identification number;
• the date of issue and the time of supply, where different;
• the supplier’s name, address and VAT registration number;
• the customer’s name and address;
• a description, quantity or extent, and unit price for the goods or services;
• the amount excluding VAT, VAT rate and total VAT charged in sterling;
• the total amount payable.

For lower-value transactions, a simplified VAT invoice may use a shorter set of details. Check the current HMRC rules rather than treating every invoice as a full VAT invoice.

Common proforma and VAT invoice mistakes

• Using the proforma to reclaim VAT: HMRC normally requires a valid VAT invoice.
• Not issuing the final document: receiving payment or making the supply can make a proper VAT invoice necessary.
• Reusing the wrong number: give the final invoice its own unique sequential invoice number and retain the proforma reference for traceability.
• Charging VAT when not registered: a non-registered business should not issue a VAT invoice or add VAT.
• Overwriting the preliminary record: keep both documents so the change from proposed to final figures is clear.

Frequently asked questions