What is Self-Billing?
Self-billing is an arrangement where the buyer creates the invoice on behalf of the seller, based on goods received or services rendered.
Self-billing is a VAT-approved arrangement where the customer (buyer) issues invoices on behalf of the supplier (seller). Instead of the seller invoicing the buyer, the buyer calculates and documents what they owe.
When is self-billing used?
- Frequent transactions: Retail supply chains with daily deliveries
- Commission-based sales: Agents receiving variable payments
- Construction industry: Main contractors billing subcontractors
- Manufacturing: Regular component supplies
Requirements for self-billing in the UK: 1. Both parties must be VAT registered 2. Written agreement must be in place 3. Supplier must not issue their own invoices for self-billed supplies 4. Documents must meet VAT invoice requirements 5. Agreement must be reviewed annually
Self-billing for subcontractors: In construction, main contractors often use self-billing to process subcontractor payments. The contractor creates "self-billed invoices" showing work done, CIS deductions, and net payment.
Pros and cons: ✅ Less admin for suppliers ✅ Faster payment processing ✅ Accurate matching of goods/services ❌ Supplier loses control over invoice timing ❌ Requires trust in buyer's calculations ❌ Setup and compliance requirements
Examples
A supermarket self-bills suppliers for produce delivered
A main contractor self-bills subcontractors weekly based on work measured
A publisher self-bills authors for royalty payments
Related Terms
CIS (Construction Industry Scheme)
CIS is a UK tax scheme where contractors deduct money from subcontractor payments and pass it to HMRC as advance tax payments.
Invoice
An invoice is a commercial document issued by a seller to a buyer, listing the products or services provided and requesting payment.
Remittance Advice
A remittance advice is a document sent by a payer to inform the recipient which invoices are being paid by a specific payment.
Put This Into Practice
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