VAT and GST errors on supplier invoices

Tax errors on supplier invoices cost money in two ways. You overpay the supplier, or you claim input tax you aren't entitled to and the tax authority later takes it back. Most errors fall into a handful of patterns.

The common errors

Wrong rate

The standard rate is charged on an item that should be reduced-rate or zero-rated, or the other way round. It often comes from a supplier's system defaulting every line to the standard rate.

Tax charged when it shouldn't be

Tax is added to exempt or zero-rated supplies, or to supplies where you should account for the tax under a reverse charge. It also happens when a supplier that isn't registered for VAT or GST charges it anyway.

Tax missing when it should be there

A registered supplier bills a taxable supply with no tax. Paying it looks cheaper now, but it usually leads to a corrected invoice and a second payment later.

Arithmetic that doesn't add up

The line totals don't sum to the subtotal, or the subtotal plus tax doesn't equal the total due. Rounding tax per line versus on the total explains a few cents. Anything larger is a mistake.

Missing details you need to reclaim tax

Without the supplier's registration number and the other required details, the document may not support an input tax claim, even if the amounts are right.

United Kingdom: VAT

• Rates: 20% standard, 5% reduced, 0% zero-rated. Some supplies are exempt (GOV.UK: VAT rates).
• To reclaim VAT you generally need a valid VAT invoice. A full VAT invoice includes a unique invoice number, the supplier's name, address and VAT registration number, the invoice date and the time of supply if different, your name and address, a description, and for each rate the net amount, the rate and the VAT charged.
• Watch for the domestic reverse charge on construction services. Under it the supplier should not charge VAT, and the invoice should say the reverse charge applies.

Australia: GST

• Rate: 10%. Some supplies are GST-free, such as many basic foods and exports.
• You need a tax invoice to claim a GST credit on purchases over A$82.50 including GST. It must show that it's intended as a tax invoice, and give the seller's identity and ABN, the date, what was sold, and the GST amount or how much of the sale is taxable.
• For sales of A$1,000 or more, the tax invoice must also show the buyer's identity or ABN.

New Zealand: GST

• Rate: 15%. Some supplies, such as exports, are zero-rated.
• Since 1 April 2023, “tax invoices” have been replaced by taxable supply information (TSI). It no longer has to be one document: invoices, bank statements, contracts and supplier agreements can support your GST return on their own or together.
• For supplies over NZ$200, a GST-registered buyer can ask for TSI, and the supplier must provide it within 28 days of the request (or by a date you agree).

What the records need to show depends on the value of the supply, GST included:

The buyer details are conditional: they matter when you, the buyer, are registered for GST and the supply is over NZ$1,000. Imported and second-hand goods have their own rules; IRD's record-keeping tool covers them.

United States: sales tax

• There is no VAT or GST. Sales tax is set by states and local jurisdictions, so rates and exemptions vary.
• Check that tax isn't charged on purchases that are exempt for you, such as goods bought for resale with a valid certificate. If a vendor doesn't charge tax that is due, you may owe use tax instead.

What to check before approving

1. Does the supplier's tax registration number appear, and does it match your supplier record?
2. Does each line's rate match what the item should carry, and what was agreed on the PO?
3. Is tax present where expected, and absent where the supply is exempt, zero-rated or reverse-charged?
4. Do the lines, subtotal, tax and total reconcile?
5. Is the document a valid invoice for reclaiming tax, not a quote, pro forma or statement?

How Tenet helps

Tenet reads the tax figures from each invoice. It checks the rate against the tax on the matched purchase order, and flags tax charged where none was expected, or missing where it was. It confirms that line amounts, subtotal, tax and total add up. It also checks that the supplier's name and tax ID agree with the PO. Anything it can't read clearly is held for review rather than guessed.