What is Self-Billing?
Written by Arnon Shimoni
✓ Expert
Last updated on:
Self-billing is an arrangement where the customer raises the invoice on the supplier's behalf, then pays it. The supplier doesn't send an invoice at all.
It sounds backwards (the buyer writing their own bill?) until you look at who actually holds the data. A marketplace knows what each seller earned this month. A haulage firm knows how many drops each subcontracted driver made. A publisher knows the royalty owed to each author. In all three cases the customer can calculate the amount faster and more accurately than the supplier can, so the customer issues the document.
At a glance | Self-billing in the UK |
|---|---|
Who issues the invoice | The customer, on the supplier's behalf |
Who must be VAT registered | Both the customer and the supplier |
HMRC approval needed | No. You don't have to tell HMRC or ask permission |
What you do need | A written self-billing agreement with each supplier |
Typical agreement length | 12 months, then review and renew |
Mandatory invoice wording | "The VAT shown is your output tax due to HMRC" |
How self-billing works
The flow has 4 steps.
The customer and supplier sign a self-billing agreement.
The supplier delivers the goods or services as usual, and stops issuing their own invoices for those supplies.
At the end of each billing cycle, the customer works out what's owed from its own records and issues a self-billed invoice to the supplier.
The customer pays that invoice. The supplier records it as a sale, the customer records it as a purchase.
The VAT treatment is the same as on a normal invoice. The supplier still owes the output tax to HMRC, and the customer still reclaims it as input tax. The only thing that moves is who produces the paperwork.
HMRC rules for VAT self-billing
HMRC's rules sit in VAT: self-billing arrangements. You don't need approval, but the customer does take on a set of obligations. Miss them and the self-billed invoices aren't valid VAT invoices, which puts the input tax claim at risk.
The customer must:
Enter into a written agreement with each supplier.
Review those agreements at regular intervals.
Keep a record of every supplier who lets them self-bill: name, address and VAT registration number.
Make sure each self-billed invoice carries the right details and is correctly issued.
Issue self-billed invoices for all of that supplier's transactions for as long as the agreement runs.
That last point catches people out. You can't self-bill a supplier in March, accept their own invoice in April, and go back to self-billing in May. For the supplies the agreement covers, it's one method or the other.
What a self-billing agreement must contain
A self-billing agreement is a short document, usually 1 page. HMRC expects it to include:
Clause | What it says |
|---|---|
Permission | The supplier agrees that the customer will issue invoices on their behalf |
No duplicate invoices | The supplier confirms they won't issue their own VAT invoices for the transactions covered |
Expiry date | Usually 12 months out, or the end of the contract if that's sooner |
Change of status | The supplier agrees to tell the customer if they deregister for VAT, get a new VAT number, or sell the business |
Outsourcing | Details of any third party that will issue the self-billed invoices for the customer |
When the agreement expires, review it and sign a new one. Agreements that run for less than 12 months (e.g., a 6-month project contract) don't need a mid-term review.
What a self-billed invoice looks like
A self-billed invoice has everything a normal VAT invoice has, plus one mandatory sentence. Here's a stripped-back example for a courier paid per delivery.
Field | Example |
|---|---|
Heading | Self-billed invoice |
Supplier | Northgate Couriers Ltd, 14 Mill Lane, Leeds. VAT no. GB 123 4567 89 |
Customer (issuer) | Parcelway Ltd, 2 Canal Street, Manchester. VAT no. GB 987 6543 21 |
Invoice number and date | SB-2026-0412, 30 September 2026 |
Description | 400 deliveries, 1 to 30 September 2026, at £2.50 each |
Net | £1,000.00 |
VAT at 20% | £200.00 |
Total | £1,200.00 |
Statement | The VAT shown is your output tax due to HMRC |
Northgate owes HMRC the £200 based on the date of supply, which can fall before Parcelway actually pays. Suppliers on self-billing need to watch for that timing gap.
Who uses self-billing
Marketplaces and platforms. The platform knows each seller's gross sales, commission and payout, so it issues the paperwork for both sides.
Logistics and haulage. Firms self-bill owner-drivers per drop, per mile or per route.
Construction. Main contractors self-bill subcontractors against certified work.
Publishing and media. Royalty and licensing statements double as self-billed invoices.
Affiliate and partner programmes. The programme owner calculates commission from its own tracking data.
Agriculture. Dairies and grain merchants self-bill farmers on measured quantity and quality.
The common thread: the payout is calculated from usage data the customer owns. That makes self-billing a metering problem as much as an invoicing one. If the delivery count or the commission base is wrong, every self-billed invoice built on it is wrong too.
Benefits and risks
For the customer | For the supplier | |
|---|---|---|
Benefits | No chasing suppliers for invoices. No mismatches between invoice and purchase records. One invoice format across hundreds of suppliers | No invoicing admin. Usually faster payment, because nothing waits on an invoice being approved |
Risks | Expired or missing agreements invalidate the invoices and the input tax claim. A supplier who deregisters without telling you leaves you issuing VAT invoices you shouldn't | Output tax can fall due before the cash arrives. You still own the numbers, so you need to check each self-billed invoice instead of trusting it |
Self-billing outside the UK
Each country sets its own conditions. EU member states allow self-billing under the VAT Directive, but the detail varies (some require an explicit acceptance step for every invoice, for example). If your supplier is abroad, the agreement has to satisfy the rules where the supplier is established.
Mandatory e-invoicing adds another layer. In countries that route invoices through a government platform, self-billed invoices generally have to go through it as well, flagged with their own document type.
Where Solvimon fits
Self-billing only works when the numbers behind it are right. Solvimon meters usage events in real time and rates them against whatever pricing you've agreed, so the per-delivery, per-transaction or commission-based amounts come out of the same data your customers and suppliers can see. If payouts and invoices are starting to disagree with each other, talk to one of our experts.
FAQ
Is self-billing legal in the UK?
Yes. It's a standard VAT arrangement covered by HMRC guidance. Both parties must be VAT registered and there must be a written agreement in place.
Do I need HMRC's permission to self-bill?
No. You don't have to notify HMRC or get approval. You do have to meet the conditions and be able to show the agreements if asked.
Can I self-bill a supplier who isn't VAT registered?
You can issue them payment statements, but those aren't VAT invoices and the VAT self-billing rules don't apply. If a supplier deregisters, stop showing VAT on what you issue to them.
How long does a self-billing agreement last?
Usually 12 months. Review it when it expires and sign a new one to keep going.
Can the supplier still send their own invoice?
Not for supplies covered by the agreement. That's one of the things the supplier signs up to.
What's the difference between self-billing and a purchase order?
A purchase order is the customer's request to buy. A self-billed invoice is the tax document for a supply that's already happened.
This page was checked against HMRC guidance in October 2026. It's a general explanation and doesn't replace advice from your accountant or tax adviser.
Related
Invoice. What a compliant invoice has to contain.
E-invoicing. Structured invoices exchanged between systems, increasingly mandatory.
Consolidated billing. Rolling many charges into one invoice.
Usage metering. Measuring the activity that self-billed amounts are calculated from.
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