What is a pro forma invoice? Meaning, VAT and whether to pay one
A pro forma asks for money before anything changes hands. It is not a VAT invoice, it stays out of your books, and the day it is paid the VAT clock starts. Here is how it works in the UK, with the numbers on both sides.
"Can you send us a pro forma?"
Take Tom, a VAT-registered joiner working from a unit outside Harrogate, as an example. It is a Tuesday in September and he has priced an oak staircase for a holiday let: £6,000 plus VAT, £7,200 in all. He has never worked for this owner and wants half up front before he orders the timber. The owner's bookkeeper replies within the hour: "Can you send us a pro forma invoice? We can't release money without one."
Tom has a VAT quarter ending on 30 September and three questions. Is a pro forma invoice just an invoice with a different title? What happens to the VAT when they pay? And would sending a proper invoice instead change anything? It would: by £600 on this quarter's return.
Quick answer
A pro forma invoice is a priced document a seller sends before supplying anything, inviting the customer to pay or commit first. It is not a VAT invoice: the customer cannot reclaim VAT on it, it has no place in either business's books, and it should say "This is not a VAT invoice". Once the customer pays or you supply, a VAT-registered seller must issue a proper VAT invoice within 30 days.
- Sending a pro forma puts nothing in your books and creates no VAT tax point.
- If the customer pays before you supply, the payment date is the tax point for the amount paid.
- A full VAT invoice sent up front makes the whole invoice taxable now, and HMRC takes advance VAT invoices out of cash accounting.
- Buyers: pay if you agreed the deal, but reclaim VAT only from the VAT invoice that follows.
What is a pro forma invoice? The meaning in plain English
The pro forma invoice meaning is easiest to see against what an ordinary invoice does. HMRC's manual says the primary function of an invoice is to provide formal confirmation of a supply, and that pro forma invoices contain some or all of the same information but do not fulfil that function (HMRC, VATREC9010). A pro forma sets out what will be supplied if payment is made, and is the document against which payment is invited. Unless the customer pays, nothing is supplied.
Pro forma, pro-forma and proforma are the same thing; the Latin means "as a matter of form".
When businesses use a pro forma invoice
HMRC says pro formas are often used to offer goods or services to customers who are not known to the supplier, or of doubtful creditworthiness. In practice that means a first job for a new customer, bespoke or made-to-order work where you have to buy materials first, a customer whose finance team needs a priced document before it can approve a payment, and overseas buyers who want a priced document before they order. Asking for payment up front is a perfectly normal term: GOV.UK says you can set your own payment terms, such as discounts for early payment and payment upfront.
What are the key differences between a proforma invoice and an official invoice?
Pro forma invoice vs invoice, with a quote alongside for comparison:
| Pro forma invoice | Quote | Invoice | |
|---|---|---|---|
| When | Before you supply, to ask for payment first | Before the customer agrees, to offer a price | When you supply, or before if you invoice in advance |
| Asks for payment? | Invites payment up front | No | Yes, by the due date |
| Creates a debt? | No | No | Yes |
| In your books? | No | No | Yes: a sale and money owed |
| VAT tax point? | No (a payment against it is one, for the amount paid) | No | Yes, the issue date, if issued before you supply or within 14 days after |
| Customer can reclaim VAT on it? | No | No | Yes, if it is a valid VAT invoice |
| Number | Its own reference series | Its own series | The next number in your invoice series |
| Should say | "Pro forma invoice" and "This is not a VAT invoice" | "Quote" and how long the price holds | "Invoice", plus your VAT number if registered |
If all you need is to confirm a price, a quote does the job; our free quote template makes one.
Is a pro forma invoice a VAT invoice?
No. HMRC's VAT guide (Notice 700) says pro forma invoices cannot be used as evidence to reclaim input tax, even if they show all the details required for a VAT invoice, and should be clearly marked "this is not a VAT invoice". GOV.UK's guide to keeping VAT records lists a pro forma invoice among the documents you cannot reclaim VAT with.
Only a VAT-registered person can issue a VAT invoice, and you must register for VAT before you charge it, so a business that is not registered shows no VAT on its pro forma either. A registered seller can show the VAT the customer will pay, so the total is right; it is still not a VAT invoice.
What happens to VAT when a pro forma is paid
The basic tax point is when goods go to the customer or a service is performed. A payment received before that creates an actual tax point for the amount received, and HMRC says most deposits serve as advance payments and create tax points when you receive them. A tax point cannot be created simply by preparing an invoice, and a pro forma is not a VAT invoice, so sending it changes nothing. Once you are paid or you supply, a full VAT invoice must follow within 30 days (HMRC, VATREC9020).
Here is Tom's job on standard VAT accounting, with quarters ending 30 September and 31 December:
| Date | What happens | VAT |
|---|---|---|
| Tue 8 Sep 2026 | Sends pro forma PF-014: £6,000 + £1,200 VAT = £7,200, asking for 50% (£3,600) before he orders timber | No tax point |
| Tue 15 Sep 2026 | Owner pays £3,600 | Tax point for £3,600; the VAT inside it is £600; it goes on the July to September return |
| By Thu 15 Oct 2026 | Issues a VAT invoice for the £3,600, within 30 days of the payment | Shows the 15 September tax point |
| Fri 6 Nov 2026 | Staircase fitted, work finished | Basic tax point for the rest |
| Mon 9 Nov 2026 | Final VAT invoice: £7,200 less £3,600 paid, £3,600 due | Issued within 14 days of finishing, so 9 November is the tax point: £600 on the October to December return |
At 20% the VAT in a VAT-inclusive amount is one sixth of it, so £3,600 holds £600 of VAT; our VAT calculator works out the VAT inside a deposit for you. Each quarter carries £600, matched by cash received or invoiced in that quarter.
Pro forma or a real invoice up front? The VAT difference
Now suppose Tom skips the pro forma and sends a full VAT invoice for £7,200 on 8 September with a request for a 50% deposit. An invoice issued before the basic tax point creates the tax point, for the whole amount, on its issue date. So £1,200 of VAT lands on the July to September return, due with payment by 7 November, although only £3,600 has arrived and the staircase is not built until November. HMRC is explicit that you cannot delay accounting for VAT until you have been paid. He funds the other £600 himself, and if the owner pulls out he needs a credit note to undo the invoice.
The Cash Accounting Scheme does not rescue it. VAT Notice 731 excludes supplies where you issue a VAT invoice in advance of making the supply, and those fall under the normal rules. The pro forma route keeps the VAT tied to the money. Either way, it pays to check each deposit landed on the right return when you reconcile the quarter.
Is a proforma invoice legally binding?
Not on its own. HMRC describes a pro forma as an offer that may or may not be taken up, with nothing supplied unless payment is received, so sending one creates no debt and does not oblige the customer to pay. It is not a demand for payment for work already done. Once the customer accepts and pays, what you both agreed applies, so make the price, what is included, how long the offer stands and your cancellation terms clear on the document, and use a written contract for big jobs. This is general information, not legal advice.
Should I pay a proforma invoice?
Yes, if you have agreed the deal and are happy to pay before delivery. Before you do:
- Check it really comes from the supplier you agreed terms with, and confirm the bank details by a phone number you already hold, not one printed on the document.
- Check it shows what you are buying, the price and how long the offer holds, and keep it as your record of what you agreed.
- Do not reclaim any VAT on it. HMRC lists customers claiming input tax twice, on the pro forma and again on the VAT invoice, as a known risk.
- Chase the VAT invoice: a VAT-registered supplier must send it within 30 days of your payment, and if it does not arrive HMRC says to go back to the supplier and ask for one.
Take a café that receives a new supplier's pro forma for an espresso machine on 2 September: £2,000 plus £400 VAT, £2,400 in all, paid the same day. It cannot reclaim the £400 from the pro forma. The supplier's VAT invoice arrives on 9 September, showing a 2 September tax point, and the café reclaims the £400 on its July to September return. If the invoice had arrived too late for that return, it would claim on the return for the period it received it.
What to put on a pro forma invoice
Whether you call it a pro forma, a proforma or an invoice proforma, the contents are practice rather than law, except where HMRC says otherwise:
- The words "Pro forma invoice" at the top, and "This is not a VAT invoice", as HMRC recommends.
- Your details and the customer's.
- What you will supply, with quantities and prices, and VAT shown separately if you are registered.
- The total, how much you want up front (all of it or a deposit) and how to pay.
- How long the offer holds, and what happens after payment: the delivery or start date, then a VAT invoice.
- A reference from its own series, such as PF-001, not your invoice numbers. VAT invoices need a sequential number that uniquely identifies each one, so keep pro formas out of that sequence.
When the money arrives or the work is done, make the proper invoice with our free invoice template.
How a pro forma, and the money, goes through your books
Nothing is posted for the pro forma itself: HMRC says it normally has no place in the books of the business issuing it or receiving it. The seller records the money when it arrives, against the customer as a payment on account or a deposit held, then raises the VAT invoice; the sale follows when the work is supplied. The buyer records the payment as a prepayment to the supplier until the VAT invoice arrives, then books the cost and the input VAT. For the café:
| Date | Debit | Credit |
|---|---|---|
| 2 Sep (pays the pro forma) | Prepayment to supplier £2,400 | Bank £2,400 |
| 9 Sep (VAT invoice arrives) | Equipment £2,000; VAT input £400 | Prepayment to supplier £2,400 |
Pro formas, quotes and deposits in IQ Books
To be clear about the limit first: IQ Books has no document called a pro forma invoice. What it has instead, and what each does to your books and VAT:
- Quotes. A quote stays outside the ledger, has its own gap-free number series separate from your invoices, and says on it that no payment is due unless the quote is accepted. It carries no bank details or pay button. Mark it accepted, declined or expired, and convert an accepted quote to a draft invoice in one click, with the lines, VAT codes and currency carried across.
- Money before the invoice. If a customer pays against a quote by bank transfer, record the receipt against the customer and leave it unallocated: it sits as a credit on their account and is allocated when you raise the invoice. Because that payment is a VAT tax point, raise the VAT invoice for it within 30 days.
- Deposit requests on invoices. Set a deposit, a percentage or a fixed amount, on an invoice, and the pay page leads with the deposit, by card through your own Stripe account or by bank transfer. This is a real invoice: issuing it posts the full amount to money owed, sales and VAT on the invoice date, as in Tom's second example.
- Project deposits. In Projects you can invoice just the deposit to a protected "customer deposits held" account, not sales, and apply it to the final invoice once paid, with a linked credit note keeping the balance and VAT traceable.
Quotes cannot be paid online, and emailing quotes and invoices from the app, with automatic reminders, is on paid plans from £5 a month; on the free plan you share each document by its link. IQ Books is UK only.
Quotes, deposits and the books in one place
One organisation with the whole double-entry ledger on the free plan, including invoices, quotes, bank feeds and VAT returns filed under Making Tax Digital.
Open IQ Books freeFrequently Asked Questions
A pro forma invoice is a priced document a seller sends before supplying anything, setting out what will be supplied and inviting the customer to pay or commit first. HMRC describes it as a document with some or all of an invoice's details that does not confirm a supply. It is not a VAT invoice and does not go in either business's books.
An invoice bills for a supply and goes in your books as money owed; if you are VAT registered it is also a VAT invoice. A pro forma comes first: it asks for payment before you supply, creates no debt, stays out of the books and cannot be used to reclaim VAT. When the pro forma is paid or the work is done, you send a proper invoice.
No. HMRC's VAT guide says a pro forma cannot be used as evidence to reclaim input tax, even if it shows every detail a VAT invoice needs, and should be clearly marked "this is not a VAT invoice". If you are VAT registered, issue a proper VAT invoice once you are paid or supply the goods or services.
Not on its own. HMRC describes a pro forma as an offer that may or may not be taken up, and nothing is supplied unless payment is received, so sending one does not create a debt or oblige the customer to pay. Once the customer accepts and pays, what you both agreed applies, so make the price, what is included and how long the offer stands clear on the document.
Pay it if you have agreed the deal and are happy to pay before delivery, which is a normal payment term. Check it really comes from the supplier, keep it as your record of what you agreed, and do not reclaim any VAT on it. A VAT-registered supplier must send you a VAT invoice within 30 days of receiving your payment, and that is the document you reclaim from.
No. You need a valid VAT invoice, and HMRC lists pro forma invoices among the documents you cannot reclaim VAT with. Record the payment as a prepayment to the supplier, then claim the VAT from the VAT invoice: on the return for the period of the supplier's tax point, or for the period you receive the invoice if it arrives later.
Not when you send it, because a pro forma creates no tax point. If the customer pays before you supply, the payment date becomes the tax point for the amount paid, so the VAT in that payment goes on that period's return and you must issue a VAT invoice within 30 days. The rest of the price follows the normal rules when you supply.
No. HMRC says a pro forma normally has no place in the books of the business that issues it or the one that receives it. Record the money when it moves: the seller records the payment as a deposit from the customer, the buyer records it as a prepayment, and the proper invoice is booked when it is issued.
IQ Books has no pro forma document. The nearest is a quote, which stays out of the ledger and says no payment is due unless it is accepted; convert it to an invoice in one click once accepted. To take money up front, issue an invoice with a deposit request, or record the payment on the customer's account and allocate it when you invoice.