My client is a sub-contractor to the main contractor supplying construction services on a continuous basis and receiving monthly payments with a self-billing agreement in place.Supplies made in January 2021 and February 2021 have not been self-billed or paid until May 2021. The client has raised internal invoices to account for the supplies on the VAT return in the 03/2021 VAT quarters.

How do we deal with the Self Billed invoices received?


Self-billing is a commercial agreement between a VAT registered supplier and a customer where the customer prepares the supplier’s VAT invoice and sends a copy to the supplier with the payment.

Self-Billed invoices can only be issued when:

  • Both parties have agreed to this method of accounting
  • A self-billing agreement is in place and
  • The rules set out in VAT notice 700/62 are followed

The time of supply rules are often referred to as the ‘tax point’ for goods and services. The time of supply fixes the time which a supply is treated as taking place for VAT. When a tax point occurs is when the supplier becomes liable to account for the VAT.

There are basic and actual tax points to consider when looking at the time of supply, VAT Notice 700 Section 14.2 sets out Tax Point rules.  For construction services with stage payments, there is no completion tax point; it is either issue of a VAT invoice or receipt of payment.

Self-billing agreements are common in the construction industry. However, the issue of a self-billed invoice does not create a tax point; the issue of a VAT invoice only creates a tax point when it is issued by a supplier.

VATTOS9130 confirms the tax point for the supply is the date of receipt of the payment by the supplier. On receiving the invoice and payment, the sub-contractor must add the date of receipt, which becomes the tax point for output tax purposes.

My client should not be raising VAT invoices internally to account for the VAT on the supplies made.

The client was paid in May 2021 therefore that is the tax point.

Further information on tax points and self-billing can be found in HMRC’s Time of Supply Manual

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