Self-Billing

Self-billing is a payment arrangement in which the buyer - rather than the supplier - prepares and issues the invoice for each transaction. The buyer calculates the amount due, raises the document in the supplier's name, and sends a copy with or before the payment. For the arrangement to be valid for VAT purposes in the UK, both parties must sign a formal self-billing agreement, and the supplier agrees not to raise its own sales invoices for any supply covered by it.

Self-billing is most common in construction, where main contractors use it with subcontractors. After the quantity surveyor certifies the value of completed work, the main contractor raises the payment document rather than waiting for an invoice to arrive. This removes a recurring source of delay: the invoice arriving late, containing figures the contractor disputes, or needing amendment before it can be processed and paid.

How Self-Billing Works in Practice

Once a self-billing agreement is signed, the buyer takes responsibility for calculating each payment, raising the invoice in the supplier's name, and sending the supplier a copy. The supplier agrees not to issue its own VAT invoice for the same supply.

To be a valid VAT document, the self-billed invoice must include the supplier's full name, address, and VAT registration number, and must state clearly that it is self-billed. If the supplier's VAT registration changes, the agreement must be renewed before further invoices can be raised. Buyers should verify supplier VAT status periodically, particularly for labour-only subcontractors who may deregister.

In construction, the CIS domestic reverse charge adds a further consideration. Where it applies to subcontractor supplies, the self-billed document must state that the customer will account for the VAT rather than the supplier.

When Self-Billing Is Used

Construction is the most common context. Main contractors certify subcontractor work through interim valuations and raise self-billed payment notices rather than waiting for the subcontractor to invoice. Labour-only subcontractors with limited admin capacity benefit from this arrangement most directly.

Recruitment agencies use self-billing with contractors they place. The agency holds the approved timesheet and the agreed rate, so it is better positioned to calculate and raise the document than waiting for the contractor to submit one.

Some wholesale and distribution businesses use self-billing where the buyer triggers dispatch and holds confirmed delivery quantity data, making it more efficient to issue the invoice from the buyer's side.

A supplier can decline a self-billing arrangement. Where a buyer's payment systems operate on a self-billing basis, declining may affect the commercial relationship. Both parties should review the agreement before signing, particularly the obligation on the supplier not to raise duplicate VAT invoices.

Zigaflow's invoice module supports generating payment documents referencing supplier details, useful for main contractors or buyers managing certified payment flows across multiple subcontractors or suppliers.