Self-Billing is an arrangement between the supplier and customer
whereby the customer raises the sales invoice and sends it to the
supplier with the payment. Some Agencies operate this scheme.
The supplier is known as the 'self-billee' and the customer the 'self-biller'.
Self-Billing arrangements may also be used outside the UK although
it is advisable to check that the paperwork or electronic paperwork is
acceptable by the tax authorities in the member state. You will also
need to be familiar with the place of supply of services if you supply services.
Agreement
To operate this system of invoicing you will need a self-billing
agreement with your customer. It is important that you have evidence
of an arrangement as HMRC could dispute any input VAT claimed without
one.
The agreement must state
- The supplier agreement that the customer will raise the invoices for the supplies
- The supplier agrees not to raise VAT sales invoices
- Show an expiry date after 12 months or related to a contractual date
- Must be made in writing or in an electronic format
- Be available for inspection by HMRC upon a visit
It is advisable to also include that should the supplier cease to be
VAT registered that they advise the customer so that no input VAT is
claimed. Also make it known if the self-billed invoice is to be
issued to a third party such as an accountant.
You do not need to advise HMRC that you operate this scheme.
Accounting and documentation
The supplier does not (and has agreed) need to raise sales invoices to the customer for the duration of the agreement.
The customer raises the purchase paperwork which must detail the
suppliers name, address, VAT registration and VAT set out from the
gross total. It must also by law be clearly written with:
THE VAT SHOWN IS YOUR OUTPUT TAX DUE TO CUSTOMS & EXCISE
The tax date of the invoice is the date of the supply of the goods or services.
If there are any discrepancies, either under or over payments, it is
the responsibility of the self-biller to correct. These must be made
on a debit note, not an amendment made on the next bill. Only the
amounts on the self-billed paperwork may be used for accounting
purposes. All documentation must be retained for a minimum of 6 years.