self billing invoice

Chapter 26

What Is a Self-Billing Invoice?

Author: Rakesh Patel

Guide On Self-billing Invoice

A self-billing invoice is an arrangement between the supplier and the buyer, wherein the customer prepares the invoice for the supplier and sends them a copy along with the payment. For this arrangement to be made, both parties have to be VAT registered and a VAT number is generated. After that, they will be able to generate VAT invoices based on VAT registered and the following conditions. 

One benefit of the Self-billing invoice is that the company or buyer of the goods won’t wait on the seller to send them an invoice before making payment. The seller of the goods and services also doesn’t need to create an invoice to get paid in this case. Invoice is generated once the timesheet has been approved by the self-biller.

Guide On Self-billing Invoice



Usually, the supplier is responsible for issuing VAT invoices. In some cases, the buyer may decide to prepare the invoice and send it to the supplier. This self-billing arrangement between both parties is known as self-billing.

This invoice type can be used by any business, but there are some conditions to be met for this process to take place. They include:

  • The buyer and seller would have agreed that the buyer creates the invoice
  • The buyer and seller must be VAT registered
  • The initial self-billing agreement will be reviewed from time to time
  • The buyer has to keep records of the seller’s goods to allow self-billing
  • The said self-billing invoice has to contain lol necessary information that should be included in a VAT invoice
  • If the seller of goods loses their VAT registration, the buyer will continue issuing the invoice. Still, they cannot include any input tax since VAT regulations no longer guide the arrangement

Also, it is essential to take note of these things:

  • Self-billing does not affect contracts and commercial agreements
  • The seller and buyer must have their copies of self-billing invoices for tax purpose

When the self-billing arrangement has been made to issue self-billing invoices, the customer generates the invoices throughout the contract.

Aside from the details of a VAT invoice, the details to be included in a self-billing invoice are:

  • Name, address, phone number, and email of the buyer and suppliers
  • VAT registration number of the buyer and seller
  • This statement has to be included “The VAT Invoice shown is your output tax due to HMRC.”
  • It has to be labeled “Self-billing Invoice

It is left to the buyer and seller in the self-billing agreement to ensure that the self-billed invoices must contain all necessary details of the goods bought with the appropriate VAT rate.

Sometimes, buyers may issue a self-billing invoice with the help of a third party on their behalf. Regardless, the buyer is still responsible for making sure the invoice is prepared and sent.

The buyer should also make sure that every billing agreement is kept with the seller. Records of the transaction should also be kept with the correct details of the business for referencing purposes and inspection by the HMRC.

The seller shouldn’t see a self-billing invoice as a purchase invoice but can reclaim the VAT included as input tax.

Does an Invoice Mean You Have Paid?

Self-billed invoices are a kind of self-billing arrangement that a company sends to its customers. A self-billing invoice is something that must be paid by your clients. That does not mean you are sending self-billing agreements because you have paid, but the self-billed invoice is purchase documentation or an agreement that a seller sends to the customers so that they can make payments to maintain the cash flow. Once a customer pays their invoices, the company or business owner will provide them a receipt generated through an accounting system or tools which is proof that the customer has paid. 

An invoice is a list of goods or services provided by a business owner or the companies along with the total amount of money owed. An invoice is sent from a seller providing the goods and services to the client with the expectation of getting paid within a certain amount of time. Sometimes companies also generate a purchase order to acknowledge the client about the product/service purchase.

An invoice comes before payment has been made, while a customer receives a receipt after making a payment.

How Do You Do Billing and Invoicing?

Invoicing’ and ‘Billing’ both are terms that often confuse the business owners, customers, and accountants. Sometimes it is confusing for the tax collectors as well. It is pretty common for people to use both terms interchangeably. However, while invoices and bills do have many things in common and they look identical, there is a thin line between both of them. Now, let’s understand how both are defined. 

Definition of an Invoice

An invoice is a document that a seller sends to a seller to outline the details of a sale to get paid and usually uses a specific invoice format. 

Invoices are considered as official, legal documents, which means that the seller can use them as proof in the case of dispute, and there are certain ways that the government will handle it. For example, you are not allowed to edit or delete anything from the invoice that has already been sent to the customer, that is why you need to be extra careful when you are creating your invoices. You also need to follow a complete sequential order once you start your invoicing process. 

Definition of a Bill

A bill is a document that describes how much money a customer owes to a business. Where an invoice refers to a very particular type of legal document that includes various types of information, billing is kind of a generic term that can apply to several different documents.

Why Use Self Billing?


Why Use Self Billing?

Here are some of the benefits of self-billing:

  • Self-billing saves time and reduces administrative tasks for the buyer and seller. Self-billing invoice also reduces costs and saves time spent on managing invoices.
  • Self-billing invoices are created by the customers, so they choose the format good for their financial administration.
  • When the timesheet is approved, the self-billing invoice is prepared and paid, and it means easy and fast payment for the seller.
  • Self-billing invoices are prepared when a timesheet is approved, and as such, the self-bill invoice contains the exact terms, days, or hours worked with their dates. There’s no room for error in a self-billing invoice.

If you prefer a self-billing invoice as a customer and your vendor is willing to get into an agreement with you, contact a tax specialist before reaching an agreement with them.

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