Self Billing and BETs

[malvolio]

That is correct - therefore if your accountant prepares your returns then it should be the self-bills that you send to them.

Craig

She does, but on the back of reported expenditure by (inter alia) invoice reference. They don't ask for copies of anything other than bank statements for the year end. I do keep all copies of invoices (mine and historical self-billing ones) and RAs should they be needed of course and if it were required it would be the agency invoice that they would be sent for any self-billed contracts

The underlying assumption is that it is my business and I am responsible for the book-keeping: that seems to suit both sides perfectly well.

[Craig at Nixon Williams]

It might seem like splitting hairs, but if there is a self-billing arrangement in place, them I'm pretty sure that as far as HMRC are concerned the only invoice that matters is the one the agency create. HMRC specifically say you shouldn't create invoices in this case although I realise most people do for record keeping purposes (I would) and as long as you don't send them, it doesn't make much difference - but if HMRC needed to see the invoice, the self-billing one is the one they'd want to see on inspection I would have thought.

Agree generally that one shouldn't expect agencies to get things right and each self-billed invoice should be properly checked!

That is correct - therefore if your accountant prepares your returns then it should be the self-bills that you send to them.

Craig

[TheCyclingProgrammer]

Fair enough - but if you are on cash accounting rather than accruals? In my case the VAT numbers are based on the invoice payment based on when the money hits the company account, and always has been. Over the quarter, surely there won't be a difference in the total VAT charged?

I'm using normal invoicing, the tax point is the date of the invoice as per the rules for continuing supply of services as I understand them (and I may be wrong, I suppose...)

It might seem like splitting hairs, but if there is a self-billing arrangement in place, them I'm pretty sure that as far as HMRC are concerned the only invoice that matters is the one the agency create. HMRC specifically say you shouldn't create invoices in this case although I realise most people do for record keeping purposes (I would) and as long as you don't send them, it doesn't make much difference - but if HMRC needed to see the invoice, the self-billing one is the one they'd want to see on inspection I would have thought.

Agree generally that one shouldn't expect agencies to get things right and each self-billed invoice should be properly checked!

[Craig at Nixon Williams]

My last post assumes you are using normal invoice accounting for VAT - if you are cash accounting then it should be the amount that has actually hit your bank account during the quarter rather than what has actually been billed for.

The differences would typically be at the end of a quarter if the self-bill was dated inside the quarter and your own was dated outside it (the self-bill and your own invoice would have different tax points).

Worth running a reconciliation like Cojak has said, but just can't use your own for VAT purposes.

Craig

[cojak]

I run a reconciliation spreadsheet for when I an self-billed. That way I can check that my days earned tallies with days paid.

And you'd be amazed at how many odd days get 'forgotten' when it comes to payment...

[malvolio]

If you are on self-billing then it is the self-billing that must be used for the purpose of calculating quarterly VAT liabilities, not your own invoices.

The reason for this (and I have seen why for real) is that clients may create their own bills based on a monthly basis and the agency does the self-bill weekly, each having a different tax point - the amount of VAT to declare, and the time that it should be declared will therefore vary. HMRC's solution for this is to insist that the self-bill is used.

Craig

Fair enough - but if you are on cash accounting rather than accruals? In my case the VAT numbers are based on the invoice payment based on when the money hits the company account, and always has been. Over the quarter, surely there won't be a difference in the total VAT charged?

I'm using normal invoicing, the tax point is the date of the invoice as per the rules for continuing supply of services as I understand them (and I may be wrong, I suppose...)

[Craig at Nixon Williams]

Except it's not following your numbering process for invoices, and it's their view of the truth, not yours. It may amaze you to learn that agencies makes mistakes, miss billings and routinely screw up your VAT accounting...

The only way you can check it is correct is to run through your usual process and see if they agree. If you're doing that you may as well carry on raising your invoices and treating the agency version as a Remittance Advice for everything except an IR35 investigation (and even then you don't suppose anyone will care less how your historical income is documented, do you?).

If you are on self-billing then it is the self-billing that must be used for the purpose of calculating quarterly VAT liabilities, not your own invoices.

The reason for this (and I have seen why for real) is that clients may create their own bills based on a monthly basis and the agency does the self-bill weekly, each having a different tax point - the amount of VAT to declare, and the time that it should be declared will therefore vary. HMRC's solution for this is to insist that the self-bill is used.

Craig

[malvolio]

This - you will get a copy of the invoice that they raise for you, so that's your evidence.

Except it's not following your numbering process for invoices, and it's their view of the truth, not yours. It may amaze you to learn that agencies makes mistakes, miss billings and routinely screw up your VAT accounting...

The only way you can check it is correct is to run through your usual process and see if they agree. If you're doing that you may as well carry on raising your invoices and treating the agency version as a Remittance Advice for everything except an IR35 investigation (and even then you don't suppose anyone will care less how your historical income is documented, do you?).

[DirtyDog]

The invoice the agency generates and sends to you *is* your invoice.

This - you will get a copy of the invoice that they raise for you, so that's your evidence.

[TheCyclingProgrammer]

The invoice the agency generates and sends to you *is* your invoice.

[Old Greg]

Agency want to move to Self Billing which I have no real objection to in principle but I was wondering how this fits with the Business Entity Test.

From HMRC


Since I will only be generating invoices for my own reconciliation purposes and not sending them to the agency, does this mean a fail on the BET?

I think you are invoicing, but not generating the invoice yourself. The pattern is:

1 Do work
2 Invoice
3 Receive payment

I'm not sure why you would be generating an invoice yourself when you have a copy of the invoice generated by the agency.

[Craig at Nixon Williams]

Don't worry about the BETs, they have no legal standing at all and do not influence your IR35 status.

The determination of IR35 stands on control, personal service and mutuality of obligation, irrespective of your BET score.

Hope this helps.
Craig

[Pondlife]

Agency want to move to Self Billing which I have no real objection to in principle but I was wondering how this fits with the Business Entity Test.

From HMRC

The Billing test
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
Score 2 points if your answer is Yes.

Since I will only be generating invoices for my own reconciliation purposes and not sending them to the agency, does this mean a fail on the BET?