Self-billing

HMRC Reference:Notice 700/62 (July 2013) View Change History
 

Contents

Foreword

1. Introduction

1.1 What is self-billing?

1.2 What's changed

1.3 Who should read this notice?

1.4 When can I operate self-billing?

2. Advantages of being a self-biller and points to watch

2.1 Advantages

2.2 Points to watch

3. Self-billing agreements

3.1 Contents of agreements

3.2 How to prepare an agreement

3.3 Reviewing agreements

3.4 What if I fail to set up an agreement?

4. Rules for self-billers

4.1 Main rules for self-billers

4.2 What information must self-billed invoices contain?

4.3 Acquiring a business from someone else who has been self-billing

4.4 Using a third party to issue self-billed invoices

4.5 Self-billed debit notes

4.6 What happens if I break the self-billing rules?

4.7 Claiming input tax incorrectly

5. Tax points for self-billed supplies

5.1 What is the tax point for supplies I self-bill?

5.2 When can I claim the input tax?

6. Information for self-billees (suppliers)

6.1 How will I know if one of my customers is intending to self-bill?

6.2 What if I do not want to agree to self-billing?

6.3 Main rules for self-billees (suppliers)

6.4 How should I treat the self-bills I receive for VAT purposes?

6.5 When do I have to account for the output tax on self-bills?

6.6 What if I can’t meet the self-billing conditions?

7. Self-billing outside the UK

7.1 Can I self-bill outside the UK?

7.2 What are the rules for intra-EC self-billing?

7.3 Supplies of goods

7.4 Supplies of services

8. Example self-billing agreement

Other notices on this or related subjects

Your rights and obligations

Do you have any comments or suggestions?

Putting things right

How we use your information

 

Foreword

This notice cancels and replaces Notice 700/62 (December 2003). Details of any changes to the previous version can be found in paragraph 1.2 of this notice.

The law on self-billing is in the Value Added Tax Act 1994, sections 29 and the VAT Regulations 1995. Regulations 13(3) and regulations 13(3A) to 13(3F). A part of this notice has the force of law under these regulations. It is indicated by being placed in a box, as in the example below.

The following rule has the force of law.


You must clearly mark each self-billed invoice you raise with the reference: 'SELF BILLING'.


1. Introduction

1.1 What is self-billing?

Self-billing is an arrangement between a supplier and a customer in which the customer prepares the supplier’s invoice and forwards a copy to the supplier with the payment.

1.2 What's changed

We have made changes to the December 2003 edition to reflect the changes to the rules for VAT self-billing introduced by Council Directive 2010/45/EU, in particular - the requirement for VAT self billed invoices to include the reference 'SELF BILLING'

1.3 Who should read this notice?

This notice is written for customers who operate, or wish to operate, self-billing with their suppliers and for suppliers who accept, or wish to accept, self-billed invoices from their customers.

If you are a…


see especially sections...


customer who issues, or who wants to start issuing self-billed invoices to your suppliers (in other words, you are a self-biller).


2 - 5 and 7 - 8


supplier who has a customer that issues, or wants to issue, you with self-billed invoices (in other words, you are a self-billee).


6, 7 - 8


1.4 When can I operate self-billing?

You can only issue self-billed invoices to your suppliers if:

  • they have agreed to this method of accounting
  • you can meet all the conditions in section 3 and paragraph 4.1

You do not need to seek our authorisation to operate self-billing.

2. Advantages of being a self-biller and points to watch

2.1 Advantages

The advantages of self-billing are:

  • your accounting staff will be working with uniform purchase documentation
  • it may make invoicing easier if you (rather than your supplier) determine the value of your purchase after the goods have been delivered or the services supplied

2.2 Points to watch

Before you begin self-billing, you should consider the following points:

  • You can only recover the VAT shown on self-billed invoices if you meet the conditions explained in this notice.
  • You may find it difficult to set up self-billing arrangements with your suppliers, or burdensome to maintain them.
  • You will be responsible for ensuring that the self-billed invoices you raise carry the correct VAT liability for the goods or services supplied to you.
  • If you are raising electronic self-billed invoices to large numbers of suppliers, you will need to ensure that your accounting system is robust and accurate enough to handle the demands you will be placing on it. There is more information about this in section 8 of Notice 700/63 Electronic Invoicing.

3. Self-billing agreements

3.1 Contents of agreements

A self-billed invoice can only be issued under an agreement with your supplier. The following table summarises what the VAT regulations say about what makes a valid self-billing agreement.

No.


A valid self- billing agreement must …


1


include the supplier’s agreement for the self-biller to raise invoices in respect of his (the self-billee’s) supplies.


2


specify that the supplier agrees not to raise VAT invoices for supplies covered by the agreement.


3


contain a start date and expiry date, though the expiry date can be related to the term of any contract between the supplier and customer.


4


bind both you and your supplier. This means it should be in writing either on paper or in electronic form.


5


be produced if you are asked to produce it by one of our visiting officers.


Because a self-billed invoice cannot evidence your entitlement to input tax if the supplier is not VAT-registered, it is advisable for the agreement to include:

No.


 

6


the supplier’s agreement that he will notify the self-biller if he ceases to be registered, transfers his business as a going concern or becomes registered under another VAT number.


And because your self-billed invoice replaces your supplier’s sales invoice it is helpful for the agreement to:

No.


 

7


make it clear if you intend to outsource responsibility for issuing the self-bills to a third party, such as an accounting bureau.


Remember, any invoice must conform with the rules for a self-billed VAT invoice in paragraph 4.2.

3.2 How to prepare an agreement

To help you prepare an agreement, we have provided an example at section 8 of this notice. You may use this and complete it with your own and your supplier’s details if you wish.

If you prefer, you can prepare your own agreement or make it part of the contract with your supplier. But if you do this, remember to include all the information required in an agreement.

3.3 Reviewing agreements

A self-billing agreement will specify the period that the agreement is to run for. If you want to continue with VAT self-billing at the end of that period, you will need to review the agreement so that you can provide us with evidence to show that your supplier has agreed to accept the invoices you raise on his behalf for a further period, and a new period for self-billing will have to be agreed between you.

However, if you have a business contract with your supplier, you may not need to make separate self-billing agreements. In these circumstances the self-billing agreement would last until the end date of the contract, and you would not need to review the self-billing agreement until the contract had expired.

Reviewing agreements is important, because it allows you to confirm that your supplier is still VAT registered and to confirm that the supplier is happy to continue the VAT self-billing arrangement with you for a further period. For this reason it is advisable to carry out a review every 12 months.

3.3.1 If I have made VAT self-billing agreements with individual suppliers on different dates, do I have to review them all on the same date?

No. If you have a large number of suppliers, and you have made agreements with them on different dates, you will review each agreement when the expiry date for each agreement occurs.

If you do make individual agreements with your suppliers on the same date, and the agreements all expire on the same date (for example, you have agreed with all of your suppliers to operate VAT self-billing for a period of 12 months from today's date) you may find it difficult to review all of the agreements on the same date. In such a situation you may, if you wish, review them on a rolling basis spread over 6 to 12 months.

If you do this, take care when setting time limits on your original agreements. Please remember, you must avoid self-billing a supplier at any time when you do not have his written agreement to do so.

3.3.2 What if I self-bill one of my suppliers for less than 12 months?

If you are providing self-billed invoices to a supplier for a period of less than 12 months, you will not normally need to review the agreement.

3.4 What if I fail to set up an agreement?

Without an agreement, the self-billed invoices you have issued are not evidence of your entitlement to input tax, and you may be assessed for tax and a penalty if you have claimed input tax on them.

4. Rules for self-billers

This section covers the rules that apply when you have a formal agreement with your supplier to self-bill.

4.1 Main rules for self-billers

If you are a self-biller you must:

  • Raise self-billed invoices for all transactions with the supplier named on the document for the period of the agreement between you and your supplier or, if you have a contract with your supplier, for the duration of that contract.
  • Complete self-billed documents showing the supplier’s name, address and VAT registration number, together with all the other details that make up a full VAT invoice. For more information of the details you need to show, see paragraph 4.2.
  • Set up a new agreement if your supplier transfers his business as a going concern, and both you and the individual who has bought the business want to continue operating self-billing.
  • Keep the names, addresses and VAT registration numbers of the suppliers who have agreed to you self-billing them, and be able to produce them for our inspection if we ask you to. We recommend that you review these details regularly so that you can be sure that you are only claiming VAT on invoices you have issued to suppliers who have valid VAT registration numbers. The simplest way of doing this is to keep a list of the suppliers you self-bill.

You must not issue self-billed VAT invoices:

  • on behalf of suppliers who are not registered, or who have deregistered
  • to your supplier if he changes his VAT registration number until you have drawn up a new self-billing agreement with him

One way that you can check whether the VAT registration number and address provided by your supplier is valid is by entering the VAT registration number on the European Commission VIES VAT registration number validation page at VIES VAT number validation.

4.2 What information must self-billed invoices contain?

The invoices must contain all the data elements listed in paragraph 16.3 of Notice 700 The VAT Guide.

The following rule has the force of law


You must clearly mark each self-billed invoice you raise with the reference: 'SELF BILLING'.


It is also advisable to include the following statement on each self-billed invoice you raise:

'THE VAT SHOWN IS YOUR OUTPUT TAX DUE TO HM REVENUE & CUSTOMS'.

This will help your suppliers to avoid claiming the VAT on these invoices as input tax in error.

4.3 Acquiring a business from someone else who has been self-billing

When this happens, you may continue to self-bill if this method suits both you and your suppliers. Section 2 will help you weigh up the advantages and disadvantages.

Please remember that if you do decide to continue self-billing, you must make a new self-billing agreement with each supplier.

4.4 Using a third party to issue self-billed invoices

If you use a third party service provider to issue self-billed invoices on your behalf, the responsibility for ensuring that invoices are issued remains with you.

This is because your suppliers will have agreed to accept the invoices that you issue on their behalf. So, you will still be responsible for:

  • setting up and reviewing self-billing agreements with your suppliers
  • keeping copies of those agreements
  • keeping the names, addresses and registration details of your suppliers
  • producing the copy agreements or your suppliers’ details for inspection when we ask you to

4.5 Self-billed debit notes

If you operate a self-billing arrangement you cannot reduce the value of the supply on a subsequent self-billed invoice. You must issue a debit note showing the amount of the adjustment to the value of the supply.

4.6 What happens if I break the self-billing rules?

If this happens the self-billed invoices you issue will not be proper invoices. They will not be evidence of your right to deduct input tax and your supplier will have to issue his own invoices.

4.7 Claiming input tax incorrectly

Claiming input tax incorrectly can result in an assessment, which may carry a penalty and interest.

To help avoid this, please remember that you cannot claim input tax:

  • when your supplier is not registered for VAT, or has deregistered or
  • on any sales invoices from your supplier where you have already issued self-billed invoices

If you find that you have claimed input tax incorrectly, please see Notice 700/45 How to correct VAT errors and make adjustments or claims. This will tell you how to correct the error and how you can avoid a penalty.

5. Tax points for self-billed supplies

5.1 What is the tax point for supplies I self-bill?

The normal tax point rules described in sections 14 and 15 of Notice 700 The VAT Guide apply, apart from those linked to the issue of a VAT invoice. This is because issuing a self-billed invoice does not normally create a tax point in the same way as a VAT invoice issued by a supplier would do.

The one exception to this is where you issue a self-billed invoice within 14 days of the basic tax point as described in paragraph 14.2.2(b) of Notice 700 The VAT Guide. This creates a tax point in the same way as a normal VAT invoice.

5.2 When can I claim the input tax?

The accounting period in which you may claim input tax is governed by the tax point for the supply in line with paragraph 5.1 above.

Where a self-billed invoice is issued with payment to the supplier a notional tax point can be used for input tax purposes. The notional tax point is the day following the date of issue of the self-billed invoice.

6. Information for self-billees (suppliers)

6.1 How will I know if one of my customers is intending to self-bill?

The customer will seek your agreement in writing. We have provided an example of a written agreement at section 8. The agreement that your customer asks you to sign will be similar to this.

The rules for agreements are explained in paragraph 3.1.

You will need to keep a copy of any self-billing agreement you make. You may keep this in either a paper or electronic format, but must be able to produce it if one of our visiting officers asks you to.

Once you have given your agreement, the main rules that apply to you as a self-billee are explained in paragraph 6.3.

6.2 What if I do not want to agree to self-billing?

We will not oblige you to agree to self-billing. However, your customer may make agreement to self-billing a condition of your making supplies to him.

6.3 Main rules for self-billees (suppliers)

If you are a self-billee, you must:

  • Not raise sales invoices for any transactions with your self-biller for the period of your self-billing agreement with him. The agreement will last either for a specified period agreed between you or, if you have a contract with your customer, for the duration of that contract.
  • Agree to accept the invoices your customer raises on your behalf for the duration of the agreement.
  • Agree to notify your customer at once if your VAT registration status changes. This is because a new agreement will have to be drawn up.

6.4 How should I treat the self-bills I receive for VAT purposes?

The self-billed invoice relates to supplies you have made to your customer, and the VAT figure on it is your output tax. You need to account for this on the VAT payable side of your VAT Account (see section 6 of Notice 700/21 Keeping Records and Accounts).

Self-billees sometimes make the mistake of treating their self-billed invoices as purchase invoices. If you have treated the VAT on a self-billed invoice as your input tax, this is an error. Section 2 of Notice 700/45 How to correct VAT errors and make adjustments or claims, tells you how to correct the error.

Remember, you must not issue your own sales invoices in respect of any transactions covered by the self-billing agreement.

6.5 When do I have to account for the output tax on self-bills?

This is governed by the tax point in the normal way. The rules are described in sections 14 and 15 of Notice 700 The VAT Guide. There is more information on the effect these rules have on self-billed supplies in section 5 of this notice.

Your customer is required to show the tax point on the self-billed invoice. You need to be aware that, under the normal tax point rules, you may still be required to account for output tax even if you have not yet:

  • received the self-billed invoice
  • or been paid for the supply

6.6 What if I can’t meet the self-billing conditions?

If you are unable to meet the conditions for self-billing in this notice, or if you fail to meet them, then you will have to advise your customers and make arrangements to issue your own invoices for the supplies you make to them.

7. Self-billing outside the UK

7.1 Can I self-bill outside the UK?

Yes. Self-billing is not restricted to domestic supplies. You may hold self-billing agreements with businesses in EC Member States and in countries outside the EC.

7.2 What are the rules for intra-EC self-billing?

Individual Member States cannot impose additional conditions for VAT self billing, so there will not be any additional conditions or procedures for self billing in the Member State in whose territory the goods or services are supplied.

7.3 Supplies of goods

The following table tells you what you will need to bear in mind if you have self-billing agreements for supplies of goods with non-UK businesses.

If you are a…


Then you need to…


self-biller being supplied with goods from another Member State


be aware that the self-billed invoice may establish the time of acquisition in the same way as an invoice issued by the supplier. You will find more about the time of acquisition in section 4 of Notice 725 The Single Market.


self-billee supplying goods to another Member State


be able to meet the conditions in paragraph 3.1 of Notice 725 The Single Market so that you have evidence to support the zero-rating of that supply. Remember that, when you negotiate the agreement, you will be agreeing to accept all the invoices that your customer issues on your behalf. Remember also that the terms of this agreement may be different from those in the agreements you have signed with your UK customers for the reason given in paragraph 7.2.


self-biller being supplied with goods from a country outside the EC


familiarise yourself with the rules on import VAT in Notice 702 Imports. You may also need to check what information your supplier will need you to include in the invoices you raise on his behalf so that they will be acceptable to his own tax authorities as evidence of export.


self-billee making supplies of goods to a country outside the EC


meet the requirements for documentary evidence of export. These are explained in section 2 of Notice 703 Exports and removals of goods from the United Kingdom.


7.4 Supplies of services

If you have self-billing agreements for supplies of services with non-UK businesses, you will need to:

  • be familiar with the rules in Notice 741 Place of supply of services
  • agree the correct VAT treatment of the supply with the other party from the outset

8. Example self-billing agreement

What follows is an example of an acceptable self-billing agreement. You may use it if you wish to, but you do not have to word your agreement in exactly this way as long as the agreement you do use contains all the relevant information, as explained in section 3.

Example self-billing agreement

Other notices on this or related subjects

700 The VAT Guide

700/21 Keeping records and accounts

700/45 How to correct VAT errors and make adjustments or claims

700/63 Electronic Invoicing

702 Imports

703 VAT: Export of goods from the United Kingdom

725 The Single Market

741 Place of supply of services

Your rights and obligations

Your Charter explains what you can expect from us and what we expect from you. For more information go to Your Charter.

Do you have any comments or suggestions?

If you have any comments or suggestions to make about this notice, please write to:

HM Revenue & Customs
Subject Matter Experts
VAT Process Owner's Team
1st Floor, Regian House,
James Street,
Liverpool
L75 1AD

Please note this address is not for general enquiries.

For your general enquiries please phone our Helpline 0300 200 3700.

Putting things right

If you are unhappy with our service, please contact the person or office you have been dealing with. They will try to put things right. If you are still unhappy, they will tell you how to complain.

If you want to know more about making a complaint go to hmrc.gov.uk and under quick links, select Complaints and appeals.

How we use your information

HM Revenue & Customs is a Data Controller under the Data Protection Act 1998. We hold information for the purposes specified in our notification to the Information Commissioner, including the assessment and collection of tax and duties, the payment of benefits and the prevention and detection of crime, and may use this information for any of them.

We may get information about you from others, or we may give information to them. If we do, it will only be as the law permits to:

  • check the accuracy of information
  • prevent or detect crime
  • protect public funds

We may check information we receive about you with what is already in our records. This can include information provided by you, as well as by others, such as other government departments or agencies and overseas tax and customs authorities. We will not give information to anyone outside HM Revenue & Customs unless the law permits us to do so. For more information go to hmrc.gov.uk and look for Data Protection Act within the Search facility.

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