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Overview of self-billing arrangements and VAT

Under a self-billing arrangement, the customer makes out VAT invoices on behalf of suppliers who are registered for the purposes of VAT. The customer retains one copy (which they use as evidence supporting their claim for input tax credit) and sends a copy to their supplier (who uses it to calculate their output tax liabilities)¹.

It should be pointed out that the self-billing arrangements are merely a facilitation measure and do not transfer the responsibility for accounting for VAT, or even assessing the liability of the supply in question, from the supplier to the customer. Although HMRC has the power to direct, under VATA 1994, s 29 (see V3.502), that the customer account for any VAT understated on a self-billed invoice, this is an administrative discretion and cannot be relied upon by the supplier².

Examples of supply chains where self-billing is common include construction supply chains and labour supply chains. One of the