What is self-billing?
Self-billing is an arrangement where the customer, not the supplier, prepares the invoice for goods or services it has bought, and sends a copy to the supplier along with the payment. The supplier agrees not to issue its own invoices for those supplies. It is also written as self billing, and the invoices are called self-billed invoices.
It suits trades where the buyer knows the final amount better than the seller does. A dairy company that weighs and tests each milk delivery, a publisher paying royalties on its own sales figures, or a main contractor paying many subcontractors are typical users. The buyer works out what is owed, raises the invoice and pays it in one step.
The buyer writes the invoice.The customer creates the invoice for what it bought and sends the supplier a copy.
An agreement comes first.Both sides sign a self-billing agreement before any self-billed invoice is issued.
Tax still belongs to the supplier.Where VAT or GST is charged, the supplier still owes it, even though it did not write the invoice.
How self-billing works
The steps are the same in most countries.
- The buyer and the supplier sign a self-billing agreement.
- The supplier delivers the goods or does the work, and stops issuing its own invoices for it.
- The buyer calculates the amount, creates the invoice and sends a copy to the supplier.
- The buyer pays on the agreed terms, and the supplier records the invoice as a sale.
For the supplier, accounts receivable changes shape. You are no longer chasing an invoice you sent. You are checking that each self-billed invoice matches what you delivered, and that it arrives and gets paid on time.
Self-billing rules by country
Most tax offices allow self-billing if there is a written agreement and both parties are registered for the tax. The details differ.
| Country | Name | Main rules |
|---|---|---|
| United Kingdom | Self-billing | Written agreement with a start and an expiry date; no HMRC authorization needed; each invoice marked "self-billing" (VAT Notice 700/62) |
| Australia | Recipient created tax invoice (RCTI) | Written agreement; both parties registered for GST; recipient issues the RCTI within 28 days of the supply (RCTI Determination 2023) |
| New Zealand | Buyer-created taxable supply information | Both parties registered for GST and agree only the buyer issues it; IRD approval not needed (IRD) |
In the UK, HMRC says it is advisable to review a self-billing agreement every 12 months, and that a self-billed invoice should also carry the line "The VAT shown is your output tax due to HMRC" (VAT Notice 700/62). In Australia the recipient must also keep a copy of each RCTI for five years, under the same determination.
What goes in a self-billing agreement
Both partiesNames, addresses and VAT or GST numbers of the buyer and the supplier.
The supplies coveredWhich goods or services the buyer will self-bill for.
The supplier's promiseThat it will not issue its own invoices for those supplies.
Start and end datesWhen the agreement begins and when it expires or is reviewed.
Changes in registrationThat the supplier will tell the buyer if its VAT or GST registration changes or ends.
Pros and cons for the supplier
Self-billing removes invoicing work, and there is less to argue about on amounts because the buyer's own figures set them. The buyer also creates the invoice when it is ready to pay, so there is no wait for the invoice to be approved. The cost is control: you rely on the buyer's numbers and timing, and you need a routine to check each self-billed invoice against your delivery records.
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