Reply to: Self Billing Invoice vs own invoice accountant won't accept my own invoice ?

[Wanderer]

I guess you can create your own invoices while on self billing, but I find invoices long winded and you end up with masses of documents that contain only a few bytes of useful information each.

The way I deal with it is by keeping a simple spreadsheet with one row per billing period (eg, weekly or monthly) showing the period start/end date, the days worked and the date the timesheets were submitted. When the invoice is paid, I enter the payment date into the spreadsheet and the spreadsheet can highlight late or wrong payments. Pretty simple really and it can easily display several hundred invoices on one page...

[SueEllen]

Could you fail that test if you use self billing (ie, the agency raises an invoice to themselves on your behalf and sends you a copy)? If so, then I'm telling the agency they aren't using self billing any more....

The two systems I've used I actually raised the invoices on the company/agent software. In doing so I was able to put in my own invoice number there as theirs was auto-generated.

I think the real reason for self-billing is to stop the fluctuations in invoice styles. I have had more than one agent send out example invoices to all contractors on site due to things like "Company Number" being missing on some contractors invoices.

[SueEllen]

Personally, I can't understand the logic behind generating your own invoices if you are in a self-billing arrangement unless the software you are using to manage your books is sufficiently poor that invoices are the only way of recording sales.

Somebody above mentioned doing this with FreeAgent and as a FreeAgent user, I can tell you its completely unnecessary and you're just creating more work for yourself.

I'm actually a FreeAgent affiliate and as a result, I get monthly commission from them for my referrals. This is paid to me on a self-billing basis. Each month, when I get paid, I import the payment transaction into FreeAgent from my bank statement, and explain the transaction as a sale, under the appropriate category. I attach the self-billing invoice sent to me to the explanation and that's all that is needed to record this sale in my accounts.

Is this not standard behaviour for most book-keeping systems?

I know some people who still use pen and paper for their book-keeping.

Anyway I use bank statements to reconcile my expenses, sales etc. So yes my receipts and invoices are important to me.

[malvolio]

Personally, I can't understand the logic behind generating your own invoices if you are in a self-billing arrangement unless the software you are using to manage your books is sufficiently poor that invoices are the only way of recording sales.

Somebody above mentioned doing this with FreeAgent and as a FreeAgent user, I can tell you its completely unnecessary and you're just creating more work for yourself.

I'm actually a FreeAgent affiliate and as a result, I get monthly commission from them for my referrals. This is paid to me on a self-billing basis. Each month, when I get paid, I import the payment transaction into FreeAgent from my bank statement, and explain the transaction as a sale, under the appropriate category. I attach the self-billing invoice sent to me to the explanation and that's all that is needed to record this sale in my accounts.

Is this not standard behaviour for most book-keeping systems?

If you're selling accounting soutions, perhaps you should understand the difference between point sales of single items like referrals and continuing supply of services? And perhapsthe importance of using a consistent process regardless of your client's accounting foibles?

Also I don't use software, I use a simple spreadhset and a good accountant.

But hey, that's just silly ole me.

[TheCyclingProgrammer]

Personally, I can't understand the logic behind generating your own invoices if you are in a self-billing arrangement unless the software you are using to manage your books is sufficiently poor that invoices are the only way of recording sales.

Somebody above mentioned doing this with FreeAgent and as a FreeAgent user, I can tell you its completely unnecessary and you're just creating more work for yourself.

I'm actually a FreeAgent affiliate and as a result, I get monthly commission from them for my referrals. This is paid to me on a self-billing basis. Each month, when I get paid, I import the payment transaction into FreeAgent from my bank statement, and explain the transaction as a sale, under the appropriate category. I attach the self-billing invoice sent to me to the explanation and that's all that is needed to record this sale in my accounts.

Is this not standard behaviour for most book-keeping systems?

[Mr.Whippy]

Could you fail that test if you use self billing (ie, the agency raises an invoice to themselves on your behalf and sends you a copy)? If so, then I'm telling the agency they aren't using self billing any more....

I hope not... When I was with Elan and doing self billing, I didn't bother raising my own I just used the ones they provided.

Also, depends on your agency as to whether you can do your own invoices. The Elan contract stated that I had to use self-billing and couldn't send in my own Ltd Co invoice which I would've preferred but I couldn't get them to budge an inch.

[Wanderer]

Surely self bill invoices also fail the billing test element of the new IR35 business entities test.

Hmmm, you've got me wondering now. Here's the test:

The Billing test

Do you invoice for work carried out before being paid and negotiate payment terms?

Evidence

• Copies of invoices
• Copies of letters and emails about billing

Score 2 points if your answer is Yes


Could you fail that test if you use self billing (ie, the agency raises an invoice to themselves on your behalf and sends you a copy)? If so, then I'm telling the agency they aren't using self billing any more....

[centurian]

Surely self bill invoices also fail the billing test element of the new IR35 business entities test.

It's only 2 points, but those 2 points can easily make the difference between High and Medium risk.

[malvolio]

I have a valid audit trail - a signed timesheet, a copy of my invoice for the work, a matching, detailed RA from the agency saying what's been billed on my behalf. So where exactly am I being deficient or neglectful?

My main gripe with SB systems has been where they insist on applying their own variations of expenses policy and VAT accounting, meaning my systems don't balance (hint: I may have more than one VATable income stream). I'm happy to let the agency run their systems, but I'm the one responsible for keeping MyCo's records and accurately reporting its liabilities.

[pacontracting]

If and when HMRC come to look at your records, the only legal invoice for self billing work is the self billing invoice created by the agent. Anything you create yourself is worthless to HMRC because it is not 'issued'. By all means - create your own sales record using your own internal invoice numbering system) but HMRC won't be interested in this - they want to see the 'real' invoice which is the Agent created one via the self-billing agreement you entered into (and you must keep copies of these to present to HMRC when asked).

As I said - this will only become important when HMRC come to visit (and your accountant should make this clear to you at year end).

From the following HMRC page:HM Revenue & Customs: Accounts and records for your VAT

Keeping VAT records
In general, you must keep the following VAT records:

•Copies of all sales invoices you issue.
•Any self-billing agreements you make as a supplier.
•Copies of self-billing agreements you make as a customer and name, address and VAT registration number of the supplier.
<there are more requirements on the website but I've just cut out the relevant ones>

The important word here is 'issue'. If you don't issue an invoice - HMRC don't care. Self-billing invoices are issued to the agent / supplier by the agent / supplier of your behalf so you need copies of these (paper or scanned usually).

[cojak]

I would advise all clients to create their own internal invoice regardless of whether there's a self bill system in place, that way you have them available should HMRC ever ask.

I think your accountant might want them for his systems or processes, not any legal requirement.

WCS

@OP - what an absolute load of tosh. You need your own invoices for auditing purposes. I have self-billing and I still create invoices for entry into my FreeAgent accounts.

The important thing to remember with Self billing invoicing is that the Agency is raising invoices on your behalf. Providing a proper self-billing model is in place (e.g. agency has agreement with HMRC and engaged your co properly) - the agent will now raise the invoice on your behalf.

Why is this important? All invoices must have a unique number. If the agent is now raising invoices on your behalf then you raise an invoice for your own records - providing the Invoice numbers are the same you should be ok. If they are not (or worse - the agent raised a self-billing invoice with a number you have already used) - then problems may arise from HMRC for both the client and you.

This is the reason the accountant is asking for the self-billing invoices and won't accept your own 'copy'.

I don't think so - I've worked with a load of Agents, I'm not spoiling my invoce sequencing to match all of them.

I'm talking about raising an invoice for your own records, not raising one to give to the client.

Exactly - don't send them off.

Treat the paperwork you get from the self-billing agency as a Remittance Advice - since that is all it is - and all becomes clear.

Yes, it does Mal.

[pacontracting]

So, a) since the self-bill invoice is recognised by HMRC as an invoice, b) provided each self-bill invoice number is unique, and c) since you can only use this number when generating your internal invoice: Why bother creating the internal invoice?
Seems like a waste of effort to me, unless there is some other reason I haven't seen where HMRC want to see an internal invoice?..

This is typically done if you are running your own internal bookeeping software. Normally, this software auto-generates invoice numbers so self-billing basically knackers this up as you need to generate an invoice in the software to be able to track VAT, track your business accounts, assets etc. As the self-billing invoices have their own numbering system - you usually have to manipulate your software to take this into account so is a bit of a pain.

If you don't need this level of detail / don't do your own books / your business isn't complex enough to warrant this then you are right - you don't need to generate internal invoices.

[Swamp Thing]

The important thing to remember with Self billing invoicing is that the Agency is raising invoices on your behalf. Providing a proper self-billing model is in place (e.g. agency has agreement with HMRC and engaged your co properly) - the agent will now raise the invoice on your behalf.

Why is this important? All invoices must have a unique number. If the agent is now raising invoices on your behalf then you raise an invoice for your own records - providing the Invoice numbers are the same you should be ok. If they are not (or worse - the agent raised a self-billing invoice with a number you have already used) - then problems may arise from HMRC for both the client and you.

This is the reason the accountant is asking for the self-billing invoices and won't accept your own 'copy'.

So, a) since the self-bill invoice is recognised by HMRC as an invoice, b) provided each self-bill invoice number is unique, and c) since you can only use this number when generating your internal invoice: Why bother creating the internal invoice?
Seems like a waste of effort to me, unless there is some other reason I haven't seen where HMRC want to see an internal invoice?..

[pacontracting]

Self billing

I'm talking about raising an invoice for your own records, not raising one to give to the client.

The important thing to remember with Self billing invoicing is that the Agency is raising invoices on your behalf. Providing a proper self-billing model is in place (e.g. agency has agreement with HMRC and engaged your co properly) - the agent will now raise the invoice on your behalf.

Why is this important? All invoices must have a unique number. If the agent is now raising invoices on your behalf then you raise an invoice for your own records - providing the Invoice numbers are the same you should be ok. If they are not (or worse - the agent raised a self-billing invoice with a number you have already used) - then problems may arise from HMRC for both the client and you.

This is the reason the accountant is asking for the self-billing invoices and won't accept your own 'copy'.

[Clare@InTouch]

I'm think this HMRC guidance may contradict this advice.

HM Revenue & Customs

If you are a self-billee, you must:

not raise sales invoices for any transactions with your self-biller for the period of your self-billing agreement with him. The agreement will last either for a period of 12 months or, if you have a contract with your customer, for the duration of that contract;

I'm talking about raising an invoice for your own records, not raising one to give to the client.