Self-Billing for Subcontractor Pay Runs (UK) | Zerity

• Self-billing for subcontractor pay runs (UK)
  • Why operators self-bill their subcontractors
  • What the self-billing agreement must contain
  • Start dates, expiry dates and reviews
  • What each self-billed invoice must show
  • Weekly pay run checks
  • Self-billing and CIS are different things
  • What self-billing does not decide
  • How Zerity helps
  • Common questions
    • Do I need HMRC approval to self-bill subcontractors?
    • How long does a self-billing agreement last?
    • Can I self-bill a subcontractor who is not VAT registered?
    • Does CIS apply to delivery or other non-construction subcontractors?
    • Does a self-billing agreement make a subcontractor self-employed?
  • Sources

# Self-billing for subcontractor pay runs (UK)

Quick answer. Self-billing lets you, the customer, prepare your VAT-registered subcontractors' invoices from the work you already record, so the weekly pay run starts from your own data instead of a stack of supplier invoices. You need each supplier's written agreement before the first self-billed invoice, and every invoice must follow HMRC's rules in VAT Notice 700/62. You do not need HMRC approval, and the responsibility for getting it right stays with you.

This is an operator's guide, not tax advice. Checked against VAT Notice 700/62 and regulation 13 of the VAT Regulations 1995 on 12 October 2026.

# Why operators self-bill their subcontractors

If you pay a self-employed workforce every week, the slow part of the pay run is waiting for invoices, matching them to the work done, and chasing the wrong ones.

VAT Notice 700/62 describes self-billing as an arrangement in which the customer prepares the supplier's invoice and sends a copy with the payment. HMRC lists two advantages: your finance team works with uniform purchase documents, and it may make invoicing easier where you, rather than the supplier, set the value of the work after it has been done. That is the usual position for operators who hold the rota, the agreed rates and the days worked.

The notice also lists the costs: you can only recover the VAT if you meet its conditions, agreements can be burdensome to maintain, and you are responsible for the correct VAT liability on each invoice.

So self-billing streamlines a pay run only when the paperwork behind it is in order. The rest of this guide is about that paperwork.

# What the self-billing agreement must contain

You can only self-bill suppliers with whom you have a formal self-billing agreement, and it must be in place before self-billing starts. Regulation 13(3B) of the VAT Regulations 1995 sets the core terms, and section 3.1 of the notice expands on them. A valid agreement must:

• record the supplier's agreement to you raising invoices for their supplies
• say the supplier will not raise VAT invoices for supplies the agreement covers
• say the supplier will accept each self-billed invoice you create for those supplies
• contain a start date and an expiry date (the expiry date can be tied to the term of your contract with the supplier)
• bind both of you, in writing, on paper or electronically
• include the supplier's promise to tell you if they stop being VAT registered, transfer the business as a going concern, or register under another VAT number
• make clear if a third party, such as an accounting bureau, will issue the self-bills

You must also be able to produce the agreement if an HMRC officer asks for it. HMRC publishes an example agreement with the notice, and you can use it or write your own, including making it part of your contract, as long as every required point is there.

# Start dates, expiry dates and reviews

This is where many pay runs go wrong. The agreement runs for the period it specifies. If you want to keep self-billing after that, you and the supplier agree a new period.

If the self-billing terms sit inside your contract with the supplier, the notice says the agreement lasts until the contract's end date, and you would not need to review it until the contract expires. HMRC says it is advisable to review agreements every 12 months, to confirm the supplier is still VAT registered and still happy to continue.

With a large number of suppliers signed on different dates, the notice says to review each agreement on its expiry date. If they were all signed on the same day, you can review them on a rolling basis over 6 to 12 months, as long as you set the time limits in the original agreements. Above all, you must not self-bill a supplier at any time when you do not have their written agreement.

Regulation 13(3C) adds that an agreement is treated as expired if either business is transferred as a going concern, or if the supplier stops being VAT registered.

# What each self-billed invoice must show

Each self-billed invoice must carry the supplier's name, address and VAT registration number, plus all the other details of a full VAT invoice. The notice gives one line the force of law: you must clearly mark each self-billed invoice "SELF-BILLING". HMRC also advises adding "The VAT shown is your output tax due to HMRC", so the supplier does not reclaim it by mistake.

Under regulation 13(5), the invoice must be provided within 30 days of the time the supply is treated as taking place, unless HMRC allows longer. Section 5 of the notice explains the tax point. The normal rules apply, but issuing a self-billed invoice does not normally create a tax point. The exception is an invoice issued within 14 days of the basic tax point.

To correct a price, issue a debit note. Do not quietly reduce the next invoice.

# Weekly pay run checks

Before each run, check the basics the notice puts on you:

1. Live agreement. Every supplier in the run has a signed agreement whose period covers the work being paid.
2. VAT registration. You keep a list of each supplier's name, address and VAT number, and review it regularly. The notice points to HMRC's Check a UK VAT number service.
3. No VAT invoice for unregistered suppliers. You must not issue self-billed VAT invoices for suppliers who are not registered, or who have cancelled their registration.
4. Changed VAT number. Stop self-billing that supplier until a new agreement is in place.
5. No duplicate invoices. The supplier must not send their own sales invoice for work you have self-billed, and you cannot claim input tax on one.

If the rules are broken, the notice says the self-billed invoices are not proper invoices, they are not evidence of your right to deduct input tax, and the supplier has to issue their own. Without an agreement, your self-billed invoices are not evidence of your right to input tax, and if you have claimed input tax on them HMRC may assess you for tax and charge a penalty. Using a third party or software to issue the invoices does not move these duties: the notice says you remain responsible for setting up and reviewing agreements, keeping copies and keeping supplier details.

# Self-billing and CIS are different things

Search for "subcontractor self-billing" and much of what comes back is about construction. The Construction Industry Scheme (CIS) applies only to construction work, such as building, civil engineering, alterations, repairs and site preparation. Under CIS, contractors deduct money from subcontractors' payments and pass it to HMRC.

CIS does not apply to delivery or other non-construction subcontractors. GOV.UK lists "delivering materials" among the jobs that do not need CIS registration. If you run a courier operation or another non-construction self-employed workforce, VAT self-billing under Notice 700/62 is the relevant regime, not CIS. Check the CIS rules if any of the work is construction work. For example, cleaning the inside of buildings after construction work is covered.

# What self-billing does not decide

A self-billing agreement is a VAT invoicing arrangement. It does not decide whether someone is self-employed, a worker or an employee. GOV.UK notes that employment status can differ between employment law and tax law, and that courts and tribunals can make final decisions on it. Do not treat a self-billed invoice as evidence of status. That assessment is yours to make on the facts. For a courier-specific walk-through of the rules, read our deep dive on HMRC self-billing for couriers.

# How Zerity helps

Zerity is one operating system for compliance and operations across your self-employed workforce, and self-billed invoicing is part of it:

• The self-billing agreement is stored on each subcontractor's record.
• Invoices are raised from the agreed rate and the days worked, and the PDF is kept.
• The VAT position is recorded per subcontractor, and UTR and VAT details sit on the record.
• The rota is published to the app, and days worked feed the self-bill.
• One account covers every depot, with people tagged by depot and network.
• Contracts, policies and handbooks can be stored in one place, with version history, policy acknowledgement tracking and quick retrieval for audits.

The software does not make the arrangement compliant on its own. Your agreements, VAT checks and invoice content remain your responsibility. See how this fits a wider subcontractor driver management set-up, or estimate your admin load with the compliance cost calculator. Pricing is from £6 per active driver.

Book a demo to walk through a pay run on your own data.

# Common questions

# Do I need HMRC approval to self-bill subcontractors?

No. VAT Notice 700/62 says you do not need to seek HMRC authorisation to operate self-billing. You do need each supplier's agreement, a written self-billing agreement in place before the first self-billed invoice, and invoices that follow paragraph 4.1 of the notice.

# How long does a self-billing agreement last?

It runs for the period it specifies. The agreement must contain a start date and an expiry date, and the expiry date can be tied to the term of your contract with the supplier. If the terms sit inside the contract, they last until the contract ends. HMRC says it is advisable to review agreements every 12 months.

# Can I self-bill a subcontractor who is not VAT registered?

Not with a self-billed VAT invoice. The notice says you must not issue self-billed VAT invoices for suppliers who are not registered or who have cancelled their registration. You can still pay them for the work, just not on a self-billed VAT invoice.

# Does CIS apply to delivery or other non-construction subcontractors?

No. The Construction Industry Scheme covers construction work only. GOV.UK lists delivering materials among the jobs that do not need CIS registration. Self-billing under VAT Notice 700/62 is a separate VAT arrangement and is not part of CIS.

# Does a self-billing agreement make a subcontractor self-employed?

No. Self-billing is a VAT invoicing arrangement. It does not decide employment status, which depends on the facts of the working relationship. That assessment stays with the operator, and courts and tribunals can make final decisions on it.

# Sources

• HMRC, Self-billing (VAT Notice 700/62), GOV.UK.
• The Value Added Tax Regulations 1995, regulation 13, legislation.gov.uk.
• Construction Industry Scheme (CIS), GOV.UK.
• Employment status, GOV.UK.
• Check a UK VAT number, GOV.UK.