Notice 700/62 regarding the VAT treatment of self-billing has been updated

VAT Notice 700/62, which covers the VAT treatment of self-billing, has been updated. The updates further clarify the requirements for self-billing agreements and confirm that it is the self-billees responsibility for accounting for output tax.

Paragraph 3.1 (Contents of agreements) of the Notice contains a table summary of the VAT Regulations and the requirements of a valid self-billing agreement. A valid self-billing agreement must; -

1. Include the supplier’s agreement to the self-biller raising invoices for the self-billees supplies
2. Specify that the suppler agrees not to raise VAT invoices for supplies covered by the agreement
3. Specify that the supplier will accept each self-billed invoice created by the customer for supplies made to him by the supplier
4. Contain a start date and expiry date
5. Bind both you and your supplier. This means it should be in writing, either on paper or in electronic format
6. Be easily produced should a HMRC officer request to see it

If the supplier is not VAT registered, the self-biller cannot claim the VAT back and so the agreement must include; -

7. An obligation on the suppliers to agree that he will tell the self-biller if he ceases to be registered or if there are any other changes to his VAT registration

The self-billee is aware that the customers self-billed invoice removes the need for the self-billee to raise a sales invoice, therefore the agreement must; -

8. Make it clear if the customer intends to outsource the responsibility for issuing the self-bills to a third party, such as an accounting bureau

The second update to the Notice was at Paragraph 6.4 (VAT treatment of the self-bills received) which states that the VAT shown on the self-billed invoice is the supplier’s output tax. The supplier must account for the output tax on the VAT payable side of their VAT account.

Click here to read the full VAT Notice.

Aspire Comment

If you need help implementing a self-billing agreement with your suppliers or if you’ would like a review of your self-billing arrangements, please get in touch with Aspire to discuss how we can help.