Surely one of the most unproductive uses of time must be proforma invoices. I wish to purchase an item from a supplier, but have no account - ergo the value is probably less than £100 anyway.
I get a proforma invoice, which I then pay by credit card.
I then spend time chasing for the full VAT invoice, to match with my goods and enter in AP.
Because the supplier has made the sale and payment, he doesn't tend to bother. So I have to keep checklists etc.
On a cost per transaction these must be the most expensive types, surely.
I get that there is probably scope for VAT fraud somehow, but all this effort just to get one word removed from the invoice..
(rant over)
Replies (10)
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I have a client who's renot invoices are always Proforma.
I think that the landlord thinks that he can avoid vat by issuing proformas.
It is annoying
We had a similar thread not long ago and I said then, pro-formas drive me mad - I spend so long chasing up the VAT invoices. Grrrr. Why do they bother issuing them in the first place as opposed to a "normal" invoice? Surely if an invoice is not paid it would save a lot less time just to credit it out than issuing PFs in the first place then replacing them with an invoice?
I agree. The purpose of PFs is to say, "this is what it'll cost if you want these goods - send money first, as we don't trust you to pay."
So why not put that in a letter or email ?
I thought I remembered being advised at a CPE lecture that by issuing a pro-forma the VAT point was the date payment came in, thus avoiding issues around late payment or part payment of invoices
That's nothing to do with the pro-forma. It's just normal tax point rules. Earlier of date of payment and date of (proper) invoice. It would just be the same if there was no pro-forma.
But it is not the same as if the pro-forma were an actual invoice instead, which is, I think, the point being made.
Our accountant does this. We get a paper "this is not a VAT invoice" invoice & then a paper "VAT invoice" when we pay. Quite a lot of additional work on both sides, especially as we have more than one company and pay in instalments whilst work is in progress.
One good use for pro-formas is for recordkeeping where you are paying a supplier through an intermediary (e.g. - paying estate agent's fees through a solicitor's client account). The solicitor gives you a proforma to pay against (but you will have to chase for an invoice from the estate agent).
They are used to create informal cash basis schemes (so if customer doesn't pay then no vat liability). Usually at least doubles admin (VAT invoice to be sent when invoice receipted) so not surprising that in practice many VAT invoices are not sent out.
I do think that you could reclaim VAT on a proforma as per the slightly dated https://www.taxation.co.uk/Articles/2013/05/15/307231/gone-missing as there is clear evidence that a taxable supply has been received.
Completely agree with the rant, surely pro forma invoices would be a suitable target for abolition on the grounds of simplifying life for almost everybody and also shutting the door on a bit of a tax wheeze?
When I was a lad and just learning my trade, I was taught that pro formas had to be significantly different from a proper invoice and definitely mustn't show the VAT separately or include the VAT number. These days, most pro formas are identical to proper invoices except for the term "Pro forma" or "This is not a VAT invoice" so it's hardly surprising that people get confused or can't be bothered doing it properly.