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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