Self Billing in Contract

[TheCyclingProgrammer]

I've actually asked my accountant about this and I'm awaiting the reply on how to properly record self-bill invoices (using Xero in my case). I've been warned not to create my own invoice as this would represent a duplicate tax point.

I don't know about Xero but in FreeAgent, the standard recommended way to correctly record sales on an accruals basis (and for VAT purposes if on accrual VAT accounting) is to create an invoice in the system. An exact duplicate record of the information on your self-billed invoice is not going to create a duplicate tax point because the invoice never gets sent. Think of it as nothing more than an implementation detail of how you record the sale in your books.

Unless Xero has support for logging self-billed invoices, you'll likely find the process is the same.

You *might* be able to work around it by journalling the appropriate sales/creditor accounts but you'd also have to correct journal the VAT and there's a good chance you'll mess it up - just create the dummy invoice. Nobody is ever going to know about it. If HMRC ask to see your records, you give them the self-billing invoice.

[cloudcontractor]

Makes sense, my accountant replied with the following:

In terms of self-billing invoices in XERO, as you say, you won’t be issuing your own invoices, but rather adding the self-billing invoices you receive from the customer to XERO to match off against the transactions as they clear your bank account. Be careful to raise the tax point as per your customer’s tax point to ensure any VAT is accounted for in the correct period once registered.

I'm not entirely sure what he means by 'tax point as per your customer's tax point'. Presumably he just means with the same date and details as is on their invoice.

It feels slightly clunky but since I'm not dealing in thousands of invoices across the course of the year there won't be much opportunity for my accountant to get confused, and I'm attaching the pdf of their self-bill invoice to the invoice record in Xero so it'll all be evident.

[fidot]

... but surely, you are using cash accounting?

In which case, the date on the VAT invoice isn't relevant.

[TheCyclingProgrammer]

... but surely, you are using cash accounting?

Why would you assume this? I've always used accruals basis. It's the default as far as I'm aware.

[TheCyclingProgrammer]

I'm not entirely sure what he means by 'tax point as per your customer's tax point'. Presumably he just means with the same date and details as is on their invoice.

That's exactly what he means.

[Sam B Dynamo Accounts]

I'm not entirely sure what he means by 'tax point as per your customer's tax point'. Presumably he just means with the same date and details as is on their invoice.

.

Yes that's exactly what he means

[Sam B Dynamo Accounts]

That's exactly what he means.

Jinx!

[fidot]

Why would you assume this? I've always used accruals basis. It's the default as far as I'm aware.

Accruals may be the default, but cash accounting provides the least risk approach and best cash flow for contractor companies