Self-Billing Invoices Explained (UK Guide)

What is a self-billing invoice?

A self-billing invoice is a VAT invoice the customer raises on the supplier's behalf, instead of the supplier raising it themselves — the customer prepares the invoice and forwards a copy to the supplier along with payment. It's a commercial arrangement, not a special legal status: the invoice still has to meet the same VAT rules as one the supplier would have issued.

For a UK recruitment agency, this maps directly onto the contractor relationship: the agency is the customer, and the contractor is the supplier. Once the agency has a written self-billing agreement in place, it can generate the contractor's invoice itself the moment a timesheet is approved, rather than waiting for the contractor to raise one.

Why recruitment agencies use self-billing

Waiting for dozens of contractors to each raise their own invoice, correctly, every week, is a real source of delay and error — a wrong rate, a missed PO number, a late invoice that holds up the whole payment run. Self-billing removes that step entirely: the agency already has the approved timesheet, the contractor's rate and the contract details, so it can generate an accurate invoice the moment approval happens, with nothing left for the contractor to get wrong.

It also removes a chasing problem that's specific to recruitment: a contractor who forgets to invoice, invoices the wrong week, or invoices at the wrong rate after a mid-placement rate change. None of those can happen if the agency is generating the invoice itself, directly from the same approved timesheet that determines the client invoice. For an agency running a large temp or contract desk, that consistency matters more than the individual admin-minutes saved on any one invoice.

The legal requirements (HMRC VAT Notice 700/62)

Self-billing is governed by HMRC VAT Notice 700/62. The core rule: no HMRC authorisation is required to self-bill, but you may only do it if the supplier has agreed to it, you have a formal written self-billing agreement in place before you start, and you follow the notice's rules for every invoice you raise under it.

You need a written self-billing agreement before you start

The agreement has to exist, in writing, before the first self-billed invoice is issued — not as a formality applied retroactively once a dispute arises.

What a valid self-billing agreement must contain

Per VAT Notice 700/62 §3.1, a valid agreement must:

• include the supplier's agreement to the customer raising invoices on their behalf;
• specify that the supplier agrees not to raise their own VAT invoices for supplies covered by the agreement;
• specify that the supplier will accept each self-billed invoice the customer issues;
• contain a start date and an expiry date (the expiry date can simply track the end date of a wider commercial contract);
• be in writing — paper or electronic — and bind both parties;
• be producible on request to an HMRC officer;
• include the supplier's agreement to notify the self-biller if they deregister for VAT, transfer their business, or change VAT registration number; and
• state clearly if the self-biller outsources the actual issuing of self-bills to a third party.

What every self-billed invoice must show

A self-billed document has to show the supplier's name, address and VAT registration number, alongside all the other details a full VAT invoice requires (§4.1) — it's a VAT invoice like any other, just prepared by the other party to the transaction.

When you must NOT self-bill

You must not issue self-billed VAT invoices to a supplier who isn't VAT-registered, whose VAT registration has been cancelled, or — until a new agreement is drawn up — whose VAT number has changed. This is the part that needs ongoing attention, not a one-off check: a contractor's VAT status can change during a placement.

Self-billing agreement: renewal checklist

• Confirm the supplier's VAT registration number and status before the agreement starts.
• Set a clear start date and expiry date, or tie the expiry to the end of the wider commercial contract.
• If self-billing a supplier for less than 12 months, VAT Notice 700/62 §3.3.4 says you don't normally need to review the agreement at all during that period.
• If the agreement runs longer and isn't tied to a wider contract's end date, review and renew it once its own expiry date is reached (§3.3.1) — but if it's written into a wider business contract, it runs until that contract ends and doesn't need a separate review.
• Keep the agreement producible on request — an HMRC officer can ask to see it.
• Watch for the supplier notifying a change of VAT number, deregistration or a business transfer, and stop self-billing them until a new agreement is in place if any of those happen.

Self-billing vs a normal supplier invoice — what's different

The financial outcome is the same — the supplier is still owed the invoiced amount, and VAT still applies the same way. What changes is who prepares the document and when. With a normal invoice, the supplier raises it (and can raise it whenever they choose, correctly or not). With self-billing, the customer raises it the moment they have the information needed to do so accurately — for a recruitment agency, that's the moment a timesheet is approved.

Responsibility shifts along with the document. Under a normal invoice, an error is the supplier's to fix and re-send. Under self-billing, an error is the customer's to catch — which is precisely why the customer needs its own process to get the invoice right the first time, rather than relying on a supplier's correction cycle. That's the real trade-off self-billing makes: less waiting, more accountability at the paying end.

How Templio automates self-billing from an approved timesheet

When a timesheet is approved in Templio, it can raise the contractor's self-billed invoice and the client invoice from the same approval — but only for contractors who've accepted a self-billing agreement first, exactly as VAT Notice 700/62 requires; self-billing has to be switched on for an agency's account before it's available, so no agency ends up self-billing without deliberately choosing to. With Xero connected, the self-bill goes across as a draft alongside the client invoice. See pricing for what's included, or read our AWR 12-week rule guide for how compliance tracking fits alongside invoicing.

FAQs

What is a self-billing invoice? A VAT invoice the customer prepares on the supplier's behalf and forwards with payment, instead of the supplier raising it themselves. For a recruitment agency, the agency is the customer and the contractor is the supplier.

What's the difference between self-billing and a normal invoice? Who prepares it, and when. A normal invoice is raised by the supplier, on their own schedule. A self-billed invoice is raised by the customer, typically as soon as they have the information to do it accurately — for an agency, that's the moment a timesheet is approved.

Do I need HMRC's permission to self-bill? No. VAT Notice 700/62 §1.1 doesn't require HMRC authorisation — you need the supplier's agreement and a valid written self-billing agreement in place before you start, and you must follow the notice's rules for every invoice.

What must a self-billing agreement include? At minimum: the supplier's agreement to the arrangement, their agreement not to raise their own VAT invoices for the same supplies, their agreement to accept each self-billed invoice, a start and expiry date, and their commitment to notify you of a VAT deregistration, business transfer or VAT number change. See VAT Notice 700/62 §3.1 for the full list.

How long does a self-billing agreement last? As long as its own stated expiry date, or the end date of the wider commercial contract it's tied to. If you're self-billing a supplier for less than 12 months, you don't normally need to review it during that period (§3.3.4).

Can I self-bill a supplier who isn't VAT-registered? No. You must not issue self-billed VAT invoices to a supplier who isn't VAT-registered, whose registration has been cancelled, or whose VAT number has changed without a new agreement being drawn up.

What are the disadvantages of self-billing? It shifts administrative burden onto the customer: you're now responsible for getting the invoice right, and for monitoring the supplier's VAT status on an ongoing basis rather than trusting them to flag a change. It's a genuine trade-off, not a free upgrade — it removes delay and error at the supplier end, but adds ongoing responsibility at yours.

This guide is general information, not tax advice. VAT Notice 700/62 is HMRC guidance and can be revised — check the live page before relying on a specific clause.