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HMRC internal manual

VAT Traders’ Records Manual

Other Invoicing arrangements: Self-billing: Non compliance with self-billing rules

In the first instance, minor instances of non-compliance can usually be addressed by explaining the regulatory position to the trader (see VATREC15030) as well as the difficulties which their failure to comply might present for their customer or supplier.

When faced with persistent non-compliance or with cases where the non-compliance is likely to result in assessment or investigation, your action must be based on the correct legal position and you will have no alternative but to unpick periods where the conditions of self-billing have not been met. Options will include:

  1. Requiring further evidence of input tax at the customer (self-biller). If the conditions of self-billing have not been met, the self-billed invoice is not sufficient evidence for claiming input tax and you will have to consider whether acceptable alternative evidence exists.
  2. Disallowing input tax at the customer (self-biller). If alternative evidence is not available or self-billed invoices for supplies have been raised on behalf of suppliers who are not VAT registered, the VAT shown is not input tax and cannot be recovered. The self-biller is responsible for ensuring that his suppliers are VAT registered.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

  1. Imposing additional conditions. The VAT regulations provide the Commissioners with the power to impose additional conditions in particular cases. This discretion is not delegated and details of any proposed conditions which are additional to those in Notice 700/62must be provided to the VPOT VRAP team with a reasoned case.
  2. VAT undercharged on a self-billed invoice. If a self-billed invoice understates the VAT chargeable on a supply, section 29 of the VAT Act 1994 provides that, following the service of a Notice on the customer and supplier, the department may require the customer, i.e. the person issuing the self-billed document, to pay the understated VAT. The procedures are described in detail at VATREC15070.