I am aware that suppliers do not account for VAT on proforma invoice that they recieve until a VAT invoice is supplied upon payment. However I am a bit confused on how to deal with it from the sellers perspective.
When a proforma sale is raised - should VAT be included on the sales invoice, and if VAT is included should VAT be included in the VAT return if the invoice is still in proforma status when the VAT return is due.
Eg, Proforma sale invoice raised 11/11/10 including VAT - no payment recieved by end of Dec when VAT period ended - do I include the sales VAT in VAT return?
Yes. A pro-forma can also be called an "application for payment". You would still show details of the product/service being sold, the cost of this and what the VAT will be. Instead of calling the document an Invoice, you would use the term "Pro-Forma Invoice" but it would not show as a sale in your accounts.
You only need account for the VAT at the tax point; that is when the actual sales invoice is raised which obviously could be several days or even weeks after the submission of the pro-forma.
Remember, VAT is only accounted for based on the Tax Date or Tax Point as mentioned on invoices; more commonly, this is just the date of the invoice but I have seen invoices which have both Tax Point and Issue Date, both of which were different. The Tax Point was when the product was sold and the invoice date was a couple of days later, obviously when the company was doing its admin.
Once you supplied the goods you have 30 days to issue a VAT invoice. Tax point is the time of supply, if you issue the (VAT)invoice within 14 days from the time of supply or issue it before the supply of goods you can use the invoice date as tax point otherwise you have to use the actual supply date (15 or more days). If you got full payment for the goods before the time of supply than this will be the tax point. Transactions only take place after pro-forma invoice if you supply the goods offered on the pro-forma invoice or you receive full payment from your customer whichever is the first... These are the general rules but there are a few exemptions(rare and normally with permission from HMRC).
