VAT registered businesses should use sequential invoice numbers

From 1st October 2007, new VAT invoicing regulations came into play which some small companies may not be aware of. From this date onwards, all invoices issued must use an identifying number that is unique and sequential.

Prior to this date, there was an ongoing requirement for all VAT invoices to have an identifying number, but following the 2007 rule change, businesses should be aware that they need to comply with the more precise requirements.

Although HMRC said they were very unlikely to issue penalties for non-compliance with the new rules for the first year, that period expired over a decade ago. Even so, many businesses may be unaware that such a rule exists.

Here are some notes, based on the initial HMRC FAQs at the time, which cover some of the main points on the new sequential numbering rules:

Frequently Asked Questions

  • An invoice number must form part of a logical, sequential and unique series – it can be made up purely of numbers, or a mixture of letters and numbers.
  • You can start the invoice sequence from any number (or letter/number combination) you want. So, you don’t have to start from No.1, if you want to give the impression that you’ve only just started your business.
  • You can use unique codes for each customer if you wish, as long as the series remains unique and sequential.
  • You can also run more than one invoice sequence at the same time. For example, if you want to have a separate sequence for each customer you have. This happens fairly often, for example, any invoices you issue to ‘Arc Recruitment Limited’ would start with the prefix ARC, for obvious reasons.
  • If your business has several divisions or units, each unit can have its own unique sequence of invoice numbers.
  • If an invoice is ‘spoiled’, or cancelled for whatever reason, just keep the spoiled invoice for your records in order to justify any break in the sequence.

Further information

The current requirements are mentioned in VATREC5020.

Last updated: 28th February, 2021

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