Legal status of Proforma Invoices


D

David

Hi,

The brief background to this thread is that we have always offered free
samples to customers. Unfortunately, over the past 12 months we've been
posted on many of the "freebie" web sites and as such we now have a much
higher rate of sample requests, with only a similar rate of actual
orders. We therefore want to find a why of discouraging "freebie"
hunters from genuine prospective customers. We are therefore introducing
a nominal fee for our samples.

To charge our prospective customers we are offering an online payment
option at the time of ordering the sample but we also want to offer the
option to receive an invoice with the sample. We accept that not
everyone who receives an invoice will pay.

We are VAT registered.

The online payment side is all handled and working. For the "invoice me"
option we had intended to issue proforma invoices so that, if someone
doesn't pay, we can just forget about it rather than have to chase it,
or issue a credit for it, or account for it as bad debt.

So the actual question is, can we do this <just ignore those that aren't
paid and just account for those that are> with proforma invoices? What
legal/accounting status do proforma invoices have, particularly with HMRC?

Thanks, David.
 
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T

Troy Steadman

Hi,

The brief background to this thread is that we have always offered free
samples to customers. Unfortunately, over the past 12 months we've been
posted on many of the "freebie" web sites and as such we now have a much
higher rate of sample requests, with only a similar rate of actual
orders. We therefore want to find a why of discouraging "freebie"
hunters from genuine prospective customers. We are therefore introducing
a nominal fee for our samples.

To charge our prospective customers we are offering an online payment
option at the time of ordering the sample but we also want to offer the
option to receive an invoice with the sample. We accept that not
everyone who receives an invoice will pay.

We are VAT registered.

The online payment side is all handled and working. For the "invoice me"
option we had intended to issue proforma invoices so that, if someone
doesn't pay, we can just forget about it rather than have to chase it,
or issue a credit for it, or account for it as bad debt.

So the actual question is, can we do this <just ignore those that aren't
paid and just account for those that are> with proforma invoices? What
legal/accounting status do proforma invoices have, particularly with HMRC?

Thanks, David.
They don't have any status. It is normal to raise a proforma invoice,
for information only, then to issue the legal Invoice when the sale is
confirmed. Costs a bit more in postage.
 
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N

Nogood Boyo

On Sun, 1 Jul 2007 at 15:52:27 in uk.business.accountancy David wrote:

[...]
For the "invoice me" option we had intended to issue proforma invoices
so that, if someone doesn't pay, we can just forget about it rather
than have to chase it, or issue a credit for it, or account for it as
bad debt.

So the actual question is, can we do this <just ignore those that
aren't paid and just account for those that are> with proforma
invoices? What legal/accounting status do proforma invoices have,
particularly with HMRC?

Thanks, David.
HMRC Notice 700, The VAT Guide:

"17.3 Pro-forma invoices

Pro-forma invoices are often used to offer goods or services to
potential customers. Such an offer may or may not be taken up,
and the goods or services will not be supplied unless payment is
received.

If you use pro-forma invoices in this way, they cannot be used
as evidence to reclaim input tax, even if they show all the
details required for a VAT invoice. You should ensure that they
are clearly marked “THIS IS NOT A VAT INVOICEâ€.

If after you have issued such an invoice, you actually supply
the goods or services to your customer, or receive payment, then
you must issue a proper VAT invoice."
 

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