HMRC will block recovery of VAT on invoices that do not clearly state what goods or services were supplied. We have heard that HMRC officers are using this power to query the validity of invoices, particularly in the construction sector and from employment agencies.

Where your business supplies labour or staff your customers will be rightly annoyed if HMRC says that they cannot reclaim VAT because your invoice description was not detailed enough.

An invoice for labour should, as a minimum, state the number of workers; the number of hours (or days) worked; the dates of the work; and the site address where the workers were supplied. HMRC would also like the invoice to include details of the nature of the work undertaken but this can be provided by way of a cross reference to other documents such as timesheets that show the workers' names or supporting schedules detailing what was done.

To avoid HMRC raising questions about your sales invoices and to maintain a good relationship with your customers, populate your invoices with a little more detail and cross reference where possible to contracts or timesheets.