What Is Self-Billing? When the Customer Writes the Supplier's Invoice

Self-billing is an arrangement in which the customer prepares the invoice for goods or services it has bought, instead of the supplier. HMRC defines it as "a commercial arrangement between a supplier and a customer in which the customer prepares the supplier's invoice and forwards a copy to the supplier with the payment" (VAT Notice 700/62, para 1.1).

The invoice is still the supplier's sales invoice. The customer simply writes it. For the supplier, the main change is the job itself: you stop creating invoices for that customer and start checking the ones you receive.

When self-billing makes sense

Self-billing works best when the customer holds the data that sets the price. HMRC lists two advantages for the customer: uniform purchase paperwork, and easier invoicing when the customer "determine[s] the value of your purchase after the goods have been delivered or the services supplied" (para 2.1).

Typical situations:

• Paying by measured output. A delivery network that counts drops by scan data, or a processor that weighs and grades what it buys. The customer measures, so the customer is best placed to invoice.
• Royalties and usage fees. A publisher or platform knows what was sold or streamed. The supplier only finds out from the customer's statement.
• Large buyers with a long list of suppliers. One AP system issues one consistent document format to every supplier. The supplier doesn't need its own invoice that has to be matched to a purchase order.

It is a poor fit when the supplier sets the price and knows the quantities. Examples are a fixed monthly retainer or a one-off project. In those cases ordinary invoicing from your side is simpler, using a purchase order where the customer needs one.

Worked example: a weekly self-billed invoice (UK)

Fictional businesses and sample figures, for illustration only.

Kestrel Logistics Ltd subcontracts last-mile parcel delivery to Okafor Couriers Ltd. Both are VAT-registered in the UK. They signed a self-billing agreement before the first delivery. Okafor agreed to accept Kestrel's invoices and not to issue its own VAT invoices for these deliveries. The agreement runs for the length of their 12-month contract.

The work, Monday 2 to Sunday 8 March 2026 (from Kestrel's scan data):

On Tuesday 10 March, Kestrel issues self-billed invoice SB-OKC-0027, the next number in the sequence it keeps for Okafor, and pays £1,146.24 the same day. The invoice shows:

• "SELF-BILLING" clearly marked. This is the one line of the notice that has the force of law (para 4.2).
• Okafor's name, address and VAT registration number as the supplier, and Kestrel's name and address as the customer.
• Everything else a full VAT invoice needs (VAT Notice 700, para 16.3): sequential number, tax point, issue date, a description, quantity and unit price, the VAT rate, net amounts, and the total VAT in sterling.
• The statement "The VAT shown is your output tax due to HMRC." The notice says HMRC "advises" adding it. HMRC's shorter self-billing arrangements guide says all self-billed invoices "must include" it. Include it either way.

Tax point. The deliveries happened between 2 and 8 March. Kestrel issued the invoice on 10 March, within 14 days of those dates. Under HMRC's guidance, that makes the issue date the tax point, so both businesses put the £191.04 on the VAT return covering 10 March (para 5.1 and the arrangements guide). If Kestrel had waited longer than 14 days, the tax point would stay with the dates the services were performed. A late self-bill doesn't delay the supplier's VAT.

How each side records it:

• Kestrel (customer): claims £191.04 as input tax, as long as it has the agreement and Okafor's VAT details on file.
• Okafor (supplier): records £955.20 as sales and £191.04 as output tax. HMRC warns that self-billees sometimes book the VAT on a self-bill as input tax by mistake (para 6.4). Okafor does not raise its own invoice for the same week.

A correction. When Okafor checks SB-OKC-0027 against its drivers' logs, it finds that one same-day run was canceled at the depot and never driven. The invoice is £45.00 net (£54.00 with VAT) too high. HMRC says the self-biller should not just knock the amount off next week's invoice. It should issue a debit note for the change in value (para 4.5). Kestrel issues a debit note for £45.00 plus £9.00 VAT, referencing SB-OKC-0027, and both sides adjust their records. Our guide to debit notes covers how the document works.

UK VAT rules for self-billing

In the UK, the VAT rules come from section 29 of the Value Added Tax Act 1994 and regulation 13(3) to 13(3F) of the VAT Regulations 1995. HMRC explains them in VAT Notice 700/62. The key points:

• No HMRC approval needed. "You do not need to seek HMRC authorisation to operate self-billing" (para 1.1). Both parties must agree, though, and both must be VAT-registered for the self-bill to be a VAT invoice (arrangements guide).
• The agreement comes first. It "must be in place before self-billing commences" (para 3.1). Without one, the self-billed invoices "are not evidence of your entitlement to input tax," and HMRC may assess the customer for the VAT and charge a penalty (para 3.4).
• All or nothing for the period. For the length of the agreement, the customer must self-bill every transaction with that supplier. The supplier must not issue its own sales invoices for those supplies (paras 4.1 and 6.3).
• Registration changes break the arrangement. The customer must not issue self-billed VAT invoices to a supplier who isn't registered or has deregistered. If the supplier changes its VAT number, the customer must sign a new agreement before self-billing again (para 4.1). A business transferred as a going concern also needs a new agreement. HMRC points to its Check a VAT number service.
• Unregistered suppliers. A customer can still self-bill a supplier who isn't VAT-registered. The arrangement is then outside the VAT rules, and the customer must not add VAT to those invoices (arrangements guide).
• Outsourcing doesn't move responsibility. A customer can use a third party, such as an accounting bureau, to issue the self-bills. It still remains responsible for the agreements, the supplier records and producing them for HMRC (para 4.4).
• Breaking the rules. If the rules aren't followed, the self-bills "will not be proper invoices": the customer loses its evidence for input tax, and the supplier has to issue its own invoices (para 4.6).

For what any VAT invoice must show, see our guide to VAT invoices.

What the self-billing agreement must contain (UK)

HMRC lists what a valid agreement must do (VAT Notice 700/62, para 3.1):

1. Record the supplier's agreement that the customer will raise invoices for the supplier's supplies.
2. Say the supplier won't raise VAT invoices for supplies covered by the agreement.
3. Say the supplier will accept each self-billed invoice the customer creates.
4. Give a start date and an expiry date. The expiry can be tied to the term of the underlying contract.
5. Be in writing (paper or electronic) and binding on both parties.
6. Be available to show an HMRC officer on request.
7. Include the supplier's promise to tell the customer if it deregisters, transfers the business as a going concern, or registers under a different VAT number.
8. Say whether the customer will outsource issuing the self-bills to a third party.

HMRC publishes an example agreement in section 8 of the notice. You can also put the terms in your main contract, in which case the agreement lasts as long as the contract (para 3.3.1). HMRC calls a review every 12 months "advisable" for longer arrangements. It does not normally expect a review if you self-bill a supplier for less than 12 months (paras 3.3.2 and 3.3.4).

Practical controls for both sides

The VAT rules make the arrangement valid. They don't make the numbers right. These controls follow from the rules above.

If you're the customer (self-biller):

• Keep a register of every self-billed supplier: agreement date, expiry date, legal name, address and VAT number. Set a reminder before each agreement expires.
• Check VAT numbers before the first self-bill and at each review. Stop issuing VAT self-bills the day you learn a supplier has deregistered or changed number.
• Use a separate, sequential number series for self-bills, so they can't collide with the supplier's own invoice numbers.
• Correct mistakes with a debit note, not by netting them off the next invoice.

If you're the supplier (self-billee):

• Before you sign, read the commercial terms as well as the VAT terms. HMRC won't insist that you agree to self-billing, but a customer can make it a condition of doing business (para 6.2). Settle how many days you have to dispute a self-bill and how corrections are made.
• Reconcile every self-bill against your own delivery or time records before you book it. Don't trust the customer's quantities and prices just because the document looks official. Our guide to reconciling accounts shows the matching process.
• Book the VAT on a self-bill as output tax, never input tax.
• Watch the tax point. HMRC warns that you may have to account for VAT before you've received the self-bill or been paid (para 6.5).
• Tell the customer straight away if your VAT registration changes.
• Keep the self-bills and remittance advices with your sales records. They support your accounts receivable and your VAT return.

Self-billing outside the UK

Other countries set their own conditions, and HMRC says so: "countries can set their own conditions for self-billing," so an agreement with an overseas supplier also has to meet that country's rules (arrangements guide).

• Ireland: Revenue lets a VAT-registered customer issue its supplier's VAT invoice if four conditions are met. There must be a prior agreement. The invoice must meet the content and issue conditions. There must be agreed procedures for the supplier to accept it. The invoice must be endorsed "self-billing." A supplier is treated as having issued the invoice once it accepts it (Revenue: What is self-billing?).
• Other jurisdictions: the rules differ. Check with the tax authority where the supply is taxed before you agree, especially for cross-border supplies, where place-of-supply rules decide which country's VAT applies.
• In the US, there's no VAT, so self-billing is a commercial arrangement. You still need records of your income: the IRS says "You should keep supporting documents that show the amounts and sources of your gross receipts," and lists invoices among them (IRS: What kind of records should I keep). Keep the customer's self-bill and remittance as those documents.

If customer-issued invoices will travel as structured e-invoices, see our guides to e-invoicing and invoice compliance requirements.

Your other clients

Self-billing covers only the customers you've signed an agreement with. For everyone else you still issue your own invoices, and that is where an invoice generator, invoice templates, recurring invoices and ways to accept payments come in.

Related Articles

• What Is a VAT Invoice?
• What Is a Debit Note?
• Invoice Compliance Requirements
• What Is E-Invoicing?
• What Is Accounts Receivable?

Frequently Asked Questions

What is self-billing in simple terms?

Self-billing is when the customer writes the invoice for what it bought from a supplier, instead of the supplier sending one. In HMRC's description, the customer sends the supplier a copy with the payment. It is still the supplier's sales invoice: in the UK, the VAT on it is the supplier's output tax.

Do I need HMRC's permission to use self-billing?

No. HMRC says you do not need its authorization to operate self-billing. You do need a written self-billing agreement with each supplier, signed before self-billing starts, and both businesses must be VAT-registered for the self-billed invoices to count as VAT invoices.

What must a self-billed invoice show in the UK?

Everything a full VAT invoice shows, with the supplier's name, address and VAT registration number as the supplier's details. It must be clearly marked "SELF-BILLING." HMRC also tells self-billers to include the statement "The VAT shown is your output tax due to HMRC."

Can a supplier issue its own invoice under a self-billing agreement?

No. For the length of the agreement, the supplier must not raise its own sales invoices for the supplies the agreement covers. The customer cannot claim input tax on a supplier's invoice for a supply it has already self-billed.

How do you correct a self-billed invoice?

In the UK, HMRC says the customer should not reduce a supply's value by lowering the total on a later self-billed invoice. It should issue a debit note for the amount by which the value has changed, referencing the original self-bill.

Can I refuse a customer's request to self-bill?

Yes. HMRC will not insist that you agree to self-billing. The customer can, however, make self-billing a condition of doing business with you, so it becomes a commercial decision.