A proforma, an invoice and a receipt sit at three different points in a sale, and HMRC treats them very differently. Mixing them up is one of the most common reasons UK businesses claim VAT they are not entitled to, or chase a payment that was never properly demanded. Here is what each one does and the order they normally appear in.
What is a proforma invoice?
A proforma invoice is a preliminary "this is what it will cost" document. It is sent before a sale is confirmed so the customer can see the price, line items, VAT and total before they commit. It looks like an invoice, but it is not a demand for payment and it is not a valid VAT invoice.
That last point matters. Because a proforma is not a tax invoice, no VAT can be reclaimed from it. If you are the buyer and your supplier sends a proforma, you wait for the proper VAT invoice that follows the sale and reclaim the input VAT from that document instead. HMRC's VAT invoice rules are clear that a proforma does not give the right to reclaim.
Typical reasons to send a proforma:
- Confirming a price and scope before the customer places the order
- Letting a customer arrange internal purchase approval or budget sign-off
- Requesting advance payment without raising a tax point on a sale that has not happened yet
- Quoting for export or international customers who need a document for customs
Many people use "proforma" and "quote" loosely. The practical difference is that a quote is usually a looser estimate, while a proforma mirrors the exact format of the final invoice. Either way, neither creates a payment obligation on its own. You can build either kind of document in the invoice editor and convert it to a real invoice once the work is agreed.
What is a proper invoice?
An invoice is the actual demand for payment, and for VAT-registered businesses it is also the tax document that lets the customer reclaim VAT. This is the legally significant document in the chain.
If you are VAT registered, a full VAT invoice must show all of the following, per HMRC's record-keeping rules:
| Required on a full VAT invoice |
|---|
| A unique, sequential invoice number |
| Your business name, address and VAT registration number |
| The invoice date (and the tax point / supply date if it differs) |
| The customer's name and address |
| A description of the goods or services |
| The quantity and unit price excluding VAT |
| The rate of VAT charged per item |
| The total amount excluding VAT |
| The total VAT charged |
| The total amount including VAT |
If you are not VAT registered, you still send an invoice when you sell to another business or the public sector, but it does not carry VAT lines. Per the GOV.UK guide on invoicing and taking payment, a non-VAT invoice still needs a unique identifying number, your name (or trading name) and address, the customer's name and address, a clear description of what you are charging for, the date the goods or service were supplied, the date the invoice was issued, and the amount due. If you are a sole trader, your own legal name has to appear, alongside any business name you trade under.
You only charge VAT once you are VAT registered. Registration is compulsory once your taxable turnover passes £90,000 in any rolling 12-month period (the threshold since April 2024), though you can register voluntarily below that. The GOV.UK guidance on when to register sets out both routes. For more detail on the rates themselves, see our UK VAT rates guide or the official rates of VAT on different goods and services.
One more point for VAT-registered businesses: under Making Tax Digital for VAT, you must keep digital records and file your returns through compatible software. Issuing invoices on paper alone no longer meets that requirement.
What is a receipt?
A receipt is proof that payment has been made. It is issued after money changes hands, and its job is to confirm the transaction is settled, not to demand anything. A customer keeps a receipt as evidence of what they paid and when.
A receipt is not automatically a VAT invoice. A basic card or till receipt confirms payment but may not carry everything HMRC needs for a VAT reclaim. There is a useful middle ground here: for supplies of £250 or less (including VAT), a VAT-registered supplier can issue a simplified VAT invoice, which is often the till receipt itself, provided it shows the supplier's VAT number, a description, the VAT rate and the total including VAT. Above £250, you need a full VAT invoice to reclaim the VAT, so a plain receipt is not enough on its own.
Proforma vs invoice vs receipt: side by side
This is the comparison most people are looking for. Lead with the purpose of each document, then the three questions that trip people up.
| Proforma | Invoice | Receipt | |
|---|---|---|---|
| Purpose | Preliminary estimate of cost before a sale is confirmed | Formal demand for payment for a completed or agreed sale | Confirmation that payment has been received |
| Is it a payment demand? | No | Yes | No |
| Is it a VAT document? | No (VAT cannot be reclaimed from it) | Yes, if you are VAT registered and it meets HMRC requirements | Only if it is a full or simplified VAT invoice |
| When is it issued? | Before the order is placed | When the sale is agreed or completed | After the customer pays |
The typical sequence: proforma then invoice then receipt
In practice the three documents form a clean order:
- Proforma goes out first so the customer can review the price and arrange payment or approval. Nothing is owed yet.
- Invoice follows once the order is confirmed or the work is done. This is the document that creates the legal obligation to pay, sets the payment terms, and (if you are VAT registered) becomes the tax point for VAT.
- Receipt is issued once the customer pays, confirming the balance is settled.
Not every sale uses all three. A walk-in retail sale might skip straight to a receipt. A large B2B project might send a proforma for a deposit, then a final invoice on completion, then receipts as instalments clear. The point is to know which document you are issuing and what it commits you to. Invoify supports each of these as separate document types, so a proforma is clearly labelled as a proforma and never mistaken for a tax invoice. Tracking which invoices have been paid is handled by payment tracking, which is what tells you when a receipt is due.
The most common mistake: treating a proforma as a VAT invoice
The single biggest error is a buyer reclaiming VAT from a proforma. Because a proforma is explicitly not a valid VAT invoice, HMRC can reject the claim, and on inspection you would have to repay it. If you have only received a proforma, ask your supplier for the proper VAT invoice before you record any input VAT.
It works the other way too. If you are the seller and you label a real demand for payment as a "proforma", the customer is within their rights to treat it as non-binding and delay paying. When you want the money, issue a proper invoice with a unique sequential number and clear payment terms. That also protects your right to charge statutory interest if it goes unpaid: under the Late Payment of Commercial Debts (Interest) Act 1998, B2B debts accrue interest at the Bank of England base rate plus 8%, plus fixed compensation per invoice (£40 for debts under £1,000, £70 for £1,000 to £9,999.99, and £100 for £10,000 or more). We cover the maths in how to calculate late payment interest, and the late payment interest feature does it for you. None of that applies to a proforma, because there is no enforceable debt until a real invoice is raised.
Getting the documents right
If you are unsure which document to send, the rule of thumb is simple: estimate before the sale, demand at the sale, confirm after payment. Get the invoice itself right and the other two fall into place. Our free HMRC-compliant invoice template guide walks through every required field so your invoices hold up to scrutiny.
This article is general guidance, not tax or legal advice. For anything specific to your situation, check the linked GOV.UK pages or speak to an accountant.
If you would rather not track all this by hand, Invoify lets you create proformas, full VAT invoices and receipts as distinct document types from one editor. You can start on the free plan and see the pricing when you are ready for more.