HMRC Published Guidelines (since 1970)
If you need to issue a sales document for goods or services you have not supplied yet you issue a pro-forma invoice.
A pro-forma invoice IS a valid invoice requiring your payment.
A pro-forma invoice IS NOT a VAT invoice (you will receive one of those automatically on payment)
Some Frequently Asked Questions / Clarifications about ProFormas
What is a Pro-Forma ?
A proforma is a request for payment in-advance of delivery of service/product.
Why is it different to an Invoice ?
One is a request for payment *before* delivery and one is for payment *with or after* delivery - but they are essentially the same thing.
Think of it like this ...
In a restaurant you pay for the food after eating (you are invoiced) but in a take-away you pay for the food before-hand (you recieve a pro-forma, which is immediately changed to a receipt when paid - a receipt is a form of paid invoice - although you may get both as separate documents)
Why do we use Pro-forma Invoicing ?
- It is industry standard (as well as for most services/products mandated by the regulators) that payment is made in advance of provisioning the service/product.
- We have been specifically told by HMRC to use pro-forma invoicing.
- Additionally the use of pro-forma invoicing allows clients to maintain greater control and self-service capabilities, and enables automated cancelations (of both service and pro-forma) in the event it is no longer required.
- It reduces accounting requirements (by eliminating the need for credit-notes to cancel invoices)
- Use of pro-formas makes the services and products cheaper for you.
When do I get a VAT Invoice ?
You get a VAT Invoice immediately on payment by email, on-screen viewable in the Client Portal and downloadable by PDF through the 'My Finances' section of the Client Portal for all services/products and a further copy with the item if ordering physical products to be delivered.
My accountant says pro-formas are illegal ?Quite simply, they're wrong.
If you need an accountant who understands accounting standards that are over 40 years old now please get in touch and I'm sure we can recommend a local one for you.