Sellers send a pro forma to confirm the price and terms, to ask for payment before they supply, or to give the buyer a priced document for its own approvals. HMRC describes pro forma invoices as commercial documents that should be clearly described as such and preferably marked "This is not a VAT invoice", and says they have no place in the books of account of either the business that issues them or the one that receives them.
When to use a pro forma invoice
- Payment in advance. New customers, one-off orders or custom work you would rather not supply on credit.
- Buyer approvals. The customer needs a priced document to raise a purchase order or get budget sign-off.
- Financing. A lender or leasing company wants to see what it is paying for.
- Shipping without a sale. Samples or goods sent for repair often travel with a pro forma that states their value.
Pro forma invoice vs VAT invoice
| Pro forma invoice | VAT invoice | |
|---|---|---|
| Purpose | quotes the price or asks for payment before a supply | records a supply and the VAT due on it |
| In your accounts | no | yes |
| Customer can reclaim VAT | no | yes, if it is VAT-registered |
| Creates a tax point | no | yes, if issued before the supply |
| Marking | "Pro forma" and "This is not a VAT invoice" | your VAT registration number and the other details HMRC requires |
What happens when the customer pays upfront
Under UK VAT, if you receive a payment before the basic tax point, the date you receive it becomes the tax point for the amount paid (VAT Notice 700, paragraph 14.2.2). A payment against a pro forma therefore makes VAT due, and you then issue a VAT invoice for it. HMRC says you must normally issue a VAT invoice within 30 days of the date of supply (VAT Notice 700/21, section 3.1).
Example. On 1 October 2026 you send a pro forma for £10,000 plus VAT of £2,000, and the customer pays £12,000 on 6 October. 6 October is the tax point for that payment, so the £2,000 goes on the VAT return for the period that includes it, and you issue a VAT invoice for the payment. All figures are illustrative.
What a pro forma invoice should include
- The words "Pro forma invoice" in the title and "This is not a VAT invoice".
- A reference number from a separate series, so it is never mistaken for a VAT invoice.
- The date and how long the price is valid.
- The names and addresses of the seller and the customer.
- The goods or services, quantities, prices, VAT rate and the total to pay.
- Payment terms and bank details.
Pro forma invoices and credit risk
Asking for payment against a pro forma is the simplest way to avoid credit risk on a new customer or on an order above its credit limit. Nothing is owed until you supply, so an unpaid pro forma is not an overdue invoice and does not sit in accounts receivable. It also gives you no basis for late payment interest, unless the contract itself obliges the customer to pay in advance.
Once a customer has paid a few orders on time, you can move it onto trade credit with normal payment terms.
When a customer moves from paying upfront to paying on terms, Sunbay lets you put it on a reminder path that suits a new account, for example with a reminder before the due date and an earlier escalation, and it keeps every customer reply next to the invoice. See how automated reminders and escalations work.
Frequently asked questions
Is a pro forma invoice a VAT invoice?
No. It is a commercial document that sets out a proposed sale. The customer cannot use it to reclaim VAT, and you do not record it in your accounts.
Is a pro forma invoice legally binding?
Not on its own. It sets out the terms of a proposed sale, and the obligations come from the contract the parties agree, for example when the customer accepts the terms and pays.
Do you need to issue a VAT invoice after a pro forma?
Yes, if you are VAT-registered and the customer is too. A payment received before the supply creates a tax point, and you normally issue the VAT invoice within 30 days.
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