Self-billing is the term used to describe the circumstances in which it is the recipient, rather than the supplier, who issues the VAT invoice for the supply in question. It represents the recipient’s evidence for input tax recovery. Self-billing may only be used with the agreement of the supplier. Since the supplier remains liable to account for output tax on the supply, a copy of the invoice must be sent to the supplier. This invoice must contain the words ‘SELF-BILLING’ and should also include a statement such as ‘the VAT shown is your output tax which is due to HMRC’. The recipient must keep an up-to-date record of his suppliers so that he does not inadvertently issue an invoice in respect of an unregistered supplier.
Self-billing in normally used where the recipient is in a better position to ascertain the value of the supply than the supplier, for example in respect of payments of commission on sales, or authors’ royalties.