Self Billing Agreement Vat
Self-billing is a financial agreement between a customer and a supplier. In most cases, the customer prepares the invoice and sends it to the supplier at the same time as the payment. This type of financial arrangement provides much-needed ease in transactions and virtually frees the supplier from the responsibility of writing and sending an invoice to his client. Self-billing ensures that cash flows are always consistent and fluid. Your client must display the tax point on the self-charged bill. You should be aware that under normal tax rules, you may need to consider the revenue tax, even if you haven`t done so yet: remember that you can`t issue your own sales invoices for transactions covered by the self-billing agreement. Member States cannot impose additional conditions for vat self-billing, so there are no additional conditions or procedures for self-billing in the Member State in the territory where goods or services are delivered. You don`t need permission from HM Revenue and Customs (HMRC) to self-bill. If you do, you should set the appropriate deadlines for your initial agreements when they are concluded. You must avoid self-billing from a supplier at all times if you do not have a written agreement.
Self-reporting power sometimes makes the mistake of treating their self-charged invoices as purchase invoices. If you processed VAT upstream on a self-charged invoice, that`s a mistake. Section 2 of VAT Communication 700/45: How to correct VAT errors and corrections or claims, explain how to correct the error. That`s a clue. You should check this information regularly to make sure that you only ask for VAT on invoices you have issued by suppliers with valid VAT registration numbers. The easiest way to do this is to keep a list of suppliers that are billed themselves. If you`re not sure you want to pay your suppliers yourself, Section 2 will help you assess the pros and cons. If you issue the supplier with a payment invoice, you can use a fictitious tax point to recover VAT upstream. The fictitious tax point is the day after the self-billing was issued. You can only issue invoices to suppliers with whom you have formal self-billing agreements. The contract must be in effect before the start of self-billing.
The table below summarizes what the VAT rules say about what a valid self-billing contract is. If an agency self-bills on your behalf, it`s up to you to make sure the invoices are issued correctly. The whole establishment is an agreement that has a lot of legal weight and must be agreed by your company or agency. In the VAT 700/62 communication, you will find out how customers and their suppliers should process VAT when using self-billing agreements. You both have to sign a formal self-billing agreement.