An invoice is the last thing a customer sees from your garage, and the first thing your accountant, HMRC or a small claims court will look at if anything goes wrong. Getting it right is not hard, but the rules are spread across several GOV.UK and HMRC pages, and the VAT ones are easy to get half right. This guide pulls together what the official guidance says a garage invoice must show, how to set out labour, parts and MOT lines, and what to do when an invoice needs correcting. Every rule below links to the GOV.UK page it comes from. Where your situation is unusual, check with your accountant.
What every invoice must include
GOV.UK lists the details every invoice must include, whether or not you are VAT registered:
- a unique identification number
- your company name, address and contact information
- the company name and address of the customer you are invoicing
- a clear description of what you are charging for
- the date the goods or service were provided (the supply date)
- the date of the invoice
- the amount or amounts being charged
- the VAT amount, if applicable
- the total amount owed
There are extra rules depending on how your garage is set up. On the same page, GOV.UK says a sole trader’s invoice must also show your name and any business name you use, plus an address where legal documents can be delivered to you if you trade under a business name. A limited company must show its full company name as it appears on the certificate of incorporation, and if you choose to put directors’ names on your invoices, you must include all of them.
For a garage, “a clear description of what you are charging for” means more than “service and repairs”. The customer should be able to read the invoice and see what was done to which car. That is why most garage invoices also carry the vehicle registration, make and model and the mileage when the car came in. GOV.UK does not list those as legal requirements, but they make the description meaningful and they save arguments later.
Extra details for VAT-registered garages
GOV.UK says you must use VAT invoices if you and your customer are VAT registered, and that these include more information than non-VAT invoices. HMRC’s VAT guide (VAT Notice 700), paragraph 16.3.1, sets out what a full VAT invoice must show:
- a sequential number based on one or more series which uniquely identifies the document
- the time of the supply (the tax point)
- the date of issue of the document, where it is different to the time of supply
- your name, address and VAT registration number (you can trade under a trading name, but the name and address you are registered under must appear somewhere on the invoice)
- the name and address of your customer
- a description sufficient to identify the goods or services supplied
- for each description, the quantity of the goods or the extent of the services, the rate of VAT and the amount payable excluding VAT
- the total amount payable excluding VAT
- the rate of any cash discount offered
- the total amount of VAT chargeable, in sterling
- the unit price
Notice 700 also says that if a VAT invoice includes items that are zero-rated or exempt, those items must show clearly that no VAT is payable, with a separate total for their values (paragraph 16.5).
The tax point and when to send the invoice
The tax point decides which VAT period the sale falls into. For services, Notice 700 paragraph 14.2.1 says the basic tax point is the date the service is performed, normally taken as the date all the work except invoicing is completed. If you issue the VAT invoice up to 14 days after that basic tax point, the date you issue the invoice becomes the tax point (paragraph 14.2.2). Paragraph 16.2.3 says you should normally issue a VAT invoice within 30 days of the tax point arising.
If you batch up invoices for trade accounts at the end of the month, ask your accountant how the tax point rules apply to you.
Simplified VAT invoices
Notice 700 paragraph 16.6.1 lets you issue a simplified VAT invoice if the value of the supply is £250 or less and your customer agrees. A simplified invoice must include your name, address and VAT registration number, the time of supply (tax point), a description of the goods or services, and for each VAT rate the total amount payable including VAT and the VAT rate. For retail sales, paragraph 16.6.2 says you must issue a full VAT invoice if the transaction is for more than £250, or for £250 or less when the customer asks for one. Plenty of garage jobs go over £250 once parts are in, so the simplest habit is a full VAT invoice every time.
Labour, parts and MOT lines
Labour lines
Notice 700 asks for the “extent of the services” and the unit price, and paragraph 16.3.2 says that for services the countable element might be an hourly rate or a price for standard services. For labour, that means showing the hours charged and your hourly rate, or a fixed price for a standard job such as a set service price, rather than an unexplained lump sum. If you have not worked out your hourly rate properly yet, read how to set your garage labour rate.
Parts lines
Put each part on its own line with a description, quantity, unit price, VAT rate and line total. Customers want to see what went on their car, and an itemised parts list stops the “what’s this for?” conversation at the counter. If you sell tyres or charge for consumables, list those separately too.
MOT fees
HMRC treats MOT test fees differently from the rest of the invoice. Notice 700 paragraph 25.4 says that if you are an approved MOT test centre, the fee you charge for carrying out an MOT test may be treated as outside the scope of VAT, provided it does not exceed the statutory maximum fee.
If you are not an approved test centre and you arrange the MOT at another garage on your customer’s behalf, the same paragraph says you may treat the MOT as a disbursement outside the scope of VAT only if you act as your customer’s agent, the customer knows that, and the conditions in paragraph 25.1.1 are met. Those conditions include itemising the outlay separately on your invoice and recovering only the exact amount you paid. Anything you charge above the test centre’s fee is your own service and is taxable at the standard rate, and if you do not meet the conditions you must account for VAT on the full amount. Put the MOT on its own line either way, and if you are unsure which treatment applies to you, ask your accountant.
Deposits and part payments
If you take a deposit for a big job, Notice 700 paragraph 14.2.3 says most deposits serve primarily as advance payments and create a tax point when you receive them. Show the deposit on the final invoice as an amount already paid so the balance due is clear, and make sure your VAT records reflect when the deposit was received.
Invoice numbering
GOV.UK asks for a unique identification number on every invoice, and HMRC asks VAT-registered businesses for a sequential number based on one or more series. Pick a numbering system and stick to it. Do not reuse numbers, do not go back and fill gaps, and do not delete an invoice to free up its number. GOV.UK’s guidance on keeping VAT records says VAT-registered businesses must keep copies of all the sales invoices they issue, even if they cancel them or produce one by mistake.
Payment terms and methods
GOV.UK says you can set your own payment terms, such as discounts for early payment and payment upfront. Unless you agree a payment date, the customer must pay you within 30 days of getting your invoice or the goods or service.
For retail customers, “Payment due on collection” is a clear term. For trade and fleet customers on account, put the agreed terms on every invoice, for example “Payment due within 30 days of the invoice date”. Then list how customers can pay you: card, bank transfer (with your sort code, account number and the reference to quote, usually the invoice number) and any pay-online link.
Correcting an invoice: issue a credit note
Once an invoice has gone to the customer, do not edit it or delete it. If something is wrong, issue a credit note against it, and raise a new invoice if one is needed. Notice 700 paragraph 18.2.1 says that where you allow a credit, you should issue a credit note to your customer and keep a copy.
For VAT-registered garages, paragraph 18.2.3 says a valid credit note must reflect a genuine mistake or overcharge or an agreed reduction in the value of the supply, and must show:
- its own identifying number and date of issue
- your name, address and VAT registration number
- the customer’s name and address
- a description of the goods or services being credited
- the quantity and amount for each description
- the total amount credited, excluding VAT
- the rate and amount of VAT credited, in sterling
- the number and date of the original VAT invoice
It must be issued within 14 days of the refund payment being made to the customer. Paragraph 18.2.5 adds that the VAT rate on a credit note is the one that was in force at the tax point of the original supply.
How long to keep your invoices
How long you keep invoices depends on how your garage is set up, and if more than one rule applies, follow the longest:
- VAT-registered businesses: GOV.UK says you must keep VAT records for at least 6 years.
- Sole traders: you must keep your records for at least 5 years after the 31 January submission deadline of the relevant tax year.
- Limited companies: you must keep records for 6 years from the end of the last company financial year they relate to, or longer in some cases, such as when the company buys equipment it expects to last more than 6 years.
Keep the credit notes, payment records and deposit receipts alongside the invoices.
Using the free template
The free template above is a printable A4 garage invoice laid out to cover the GOV.UK and HMRC requirements in this guide. It has spaces for:
- your garage name, address, contact details and VAT registration number
- the invoice number, invoice date and the tax point or supply date
- the customer’s name and address
- the vehicle registration, make and model and mileage
- labour lines with description, hours, hourly rate excluding VAT, VAT rate and amount excluding VAT
- parts lines with description, quantity, unit price excluding VAT, VAT rate and amount excluding VAT
- an MOT line, with room to mark it as outside the scope of VAT where that treatment applies to you
- a VAT summary with the net amount and VAT for each rate
- totals: total excluding VAT, total VAT, any amount not subject to VAT, any deposit already paid and the total due
- your payment terms and the ways customers can pay
Number the copies in sequence before you use them, and keep a copy of every one you issue. If you are not VAT registered, leave the VAT boxes empty. The job card behind the invoice matters just as much, so pair this with the garage job card template.
Checklist
- Every invoice carries a unique number, in sequence, with no reused or deleted numbers
- Your business name, address and contact details are on it (the full company name if you are a limited company)
- The customer’s name and address are on it
- The invoice date and the supply date (tax point) are both shown
- The vehicle registration and mileage are recorded against the work
- Labour is shown as hours and hourly rate, or as a fixed price for a standard job
- Each part has its own line with quantity and unit price
- VAT registered: your VAT number, the VAT rate per line and the total VAT in sterling are shown
- The MOT fee has the right VAT treatment for your garage, confirmed with your accountant
- Payment terms and payment methods are printed on the invoice
- Mistakes are corrected with a credit note that references the original invoice
- Copies of every invoice and credit note are kept for as long as your business type requires
How AutoChain handles garage invoicing
If you would rather not fill in a template by hand, AutoChain’s garage invoicing software raises the invoice straight from the job, with the parts and labour already on it and VAT calculated for you. Invoices can be non-VAT, VAT-inclusive or plus-VAT, and you can print them on A4 or email them from the job. The invoice designer gives you six layouts with your logo, colours, font, payment terms and footer, so every branded A4 printout looks like your garage.
When an invoice needs to change, you issue a credit note in AutoChain, and credit notes sync to your accounts package too. Choose online payment and the invoice email includes a secure Stripe payment link, and the invoice is marked paid automatically when the customer pays. Paid, unpaid and overdue invoices are tracked, aged debtors shows who owes what, and accounting reports, including a VAT summary, export as CSV or PDF. If you use Xero, QuickBooks Online or Sage Accounting, invoices, payments, contacts and credit notes sync live, so your accountant works from the same figures you do. You can see what it costs on the pricing page.
The invoices you receive need keeping too. AI invoice scanning reads your parts, tyre and consumables supplier invoices from a photo or PDF, matches each line to your jobs and stock, and lets you check it before anything is saved. A business manager can then download the confirmed supplier invoices, with a CSV index, to pass to your accountant.