DIY VAT: Self billing

Typically, suppliers issue VAT invoices, but in certain cases, customers prepare and provide them to suppliers. This process is known as “self-billing.” Any business can adopt self-billing if it meets specific conditions.

To begin using self-billing, no prior approval from HMRC is necessary. Businesses need to ensure compliance with legal conditions outlined in SI 1995/2518, reg 13(3), and VAT Notice 700/62. It’s advisable to review the self-billing agreement annually, providing evidence of supplier acceptance and VAT registration.

If a self-billing provision is included in a business contract with a supplier, a separate agreement may not be required. In such cases, the self-billing agreement remains valid until the contract expires.

The advantages of self-billing include uniform purchase documentation for accounting staff and simplified invoicing processes for customers.

Before implementing self-billing, businesses should consider several factors, including VAT recovery conditions, setup and maintenance challenges, and ensuring accurate VAT liabilities on self-billed invoices.

In self-billing, businesses must raise invoices for transactions with suppliers, complete them with required details, set up new agreements for business transfers, and maintain supplier information for VAT inspection.

Self-billing VAT invoices must not be issued for unregistered or deregistered suppliers. nor for suppliers with changed VAT registration numbers without updating the self-billing agreement.