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Law: Changes to VAT invoicing – Please Note

Motor retailers who use the second hand margin scheme for VAT invoicing will need to review their sales invoices under an amendment in the law from 1 October 2007.

Firstly, the declaration about input tax will not be sufficient. A form of words is required.;

  • to reference the relevant article in the EC Directive or
  • to reference the relevant UK Legislation or
  • to reference that a second had margin scheme has been applied

    HMRC suggested the following example form of wording for the letter:

  • ‘This is a second hand margin scheme supply’
  • ‘This invoice is for a second hand margin scheme supply’

    The second requirement is that invoices cannot get away with any numbering scheme, in future they will have to show a number from a series that is unique and sequential.

    You may well use such a system anyway. It can be a combination of letters and numbers. It need not start at number 1, it can start wherever you want. If you want to adopt a special sequence for certain customers then this is also acceptable.

    However, if you cancel an invoice or it is spoiled or never issued then you need to have an account of why there is a break.

    HMRC are to produce a revision to their Notice 718 regarding the new requirements, and we will keep you posted of developments. HMRC have indicated they will only issue penalties for non compliance during the first year in exceptional cases.

    Visit or call 0870 26 77 118 for more information.

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