Self Billing Invoices

Self Billing can work really well if the company is good to its word, ie: pays on time. However, it relies heavily on information processed correctly at the customer end. ALWAYS make sure you have a purchase order for the job, ALWAYS agree any extras AS THEY OCCUR and get an amended/additional purchase order to cover the additional costs. Basically, if the accountant has no record at his end, he wont pay it. You should get a payment advice notice from the client, obviously just check to make sure its correct. It seems like a pain in the ar5e, but thats only because its different. Once you get into the rhythm, it can work really well, but as I said, ALWAYS, ALWAYS, ALWAYS get a P.O. to cover the costs, preferably prior to doing the work.
If you keep on top of the ex
 
Is that where you just provide a valuation and they then just pay what they want??if so then yes,i have done this system with no problem's,maybe that was because it was a descent client,on the upside,no vat is due untill you've been paid as your providing a valuation rather than an invoice,but you would be at the mercy of any unscrupulous Q.S.'s,as pointed out by hswt:unsure:


Bang on snakehips,i was typing whilst you posted,very good advice regarding P.O.'s and signed datsheets.
 
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continued.....If you keep on top of the extra costs and make sure they are communicated to the client and make sure you have P.O. (it is also good business practise to also issue an order acknowledgement) you should have no problems.
This practise of self billing is becoming more prevalent in business as it allows the bean counters to prepare their P & L, Balance sheets etc earlier as they use the P.O's issued as their costs, as opposed to invoices received which can be 10-15 days (even longer sometimes) into the next month. This is why you must get a P.O. for any costs agreed, because as I said earlier, if the accountant has no record at his end, he wont pay.
 
thanks for the help i have rung the potential client and asked what there payment terms are as we operate on 30 day net and i dont want to work on 60 or 90 days as you all know cash flow is king
but the form they sent is just an agreement with no terms just an explanation of how the will generate the bills
but all the info on alteration P O will be very valuable like everyone in the industry changes and alterations on the day can occur and i dont want to be giving away our service and skill so thankyou once again
 
Cash is king indeed. If they are a new client, it is important that payment terms are agreed prior to commencing work. An accountant will always refer to the terms and conditions printed on the purchase order, so if their terms are 90 days, 90 days is what it will be. If you want payment quicker they will usually try to negotiate a discount. If the service or product you are supplying is considered valuable to their business (key supplier status) they will usually negotiate to accomodate your business requirements, but again always make agreements regarding T & C's, costs, etc, PRIOR to undertaking work.
Unfortunately these days, a handshake is not good enough, and a mans word is not worth the paper its written on.
 
The self billing system is nothing to worry about. It came in when VAT started to be applied to building works in the 1970’s. Before then we issued the employer with a ‘Certificate for Interim/Final payment’ claiming our works on a monthly basis pro rata to progress. By signing the form you have you will agree not to issue VAT invoices in favour of ‘Applications for payment’.
It is also good to note the 2012 change in the Construction Act and make sure your applications are received by your ‘employers surveyor’ by the agreed application date. If there is a difference of agreement to your claim He must issue a ‘pay less notice’ stating the reason for underpayment – giving you time to discuss the shortfall. (Clause 4.9.3) If he does not follow the rules he will be in Breach of contract
 
Self billing is actually the biggest pain in the arse ever when it comes to getting paid for what you have done. We have 5 customers that operate the SB system and we are forever seeking payment. The systems is geared towards the payee and does zero to benefit us. You send an Application for Payment without VAT shown and then it should be a mutual agreement on what should be paid and then you raise a VAT invoice to send to the customer for what is to be paid by them. Now that is all fair and well if they tell you what they are going to be paying you.... But normally they do not.....and you receive the remittance or payment certificate showing amounts missing that you will have to claim on you next application for payment. It is a licence to hold payment for an extra 30 days. Not a good system at all.
 
I agree with snakehips always get a site instruction before hand .but to be honest this seems to be a strange way of working to me never come across it myself
 
didn't do gemeni any favours

Gemini Riteway Scaffolding Ltd (TC2053)

The taxpayer company was subcontracted to provide scaffolding for halls of residence at two universities. Haymills and Leadbitters were the main contractors.
In December 2007, HMRC visited the taxpayer and found it had not accounted for VAT on supplies made to the contractors, because neither had included VAT in the self-billed invoices they issued retrospectively to the subcontractor.
The VAT officer advised the taxpayer that, although the hire of scaffolding must be standard rated, supplies of erection and dismantling of scaffolding should be zero rated when the project was the construction of a university hall of residence. A fair and reasonable apportionment was required.
The advice was incorrect: under VATA 1994, Sch 8 group 5, zero rating only applies where such services are supplied ‘in the course of construction’. Only the main contractor makes supplies in the course of construction, a subcontractor does not and, as a matter of law, all its supplies should be standard rated.
The VAT officer suggested the taxpayer submit VAT-only invoices to the contractors, which it did, and passed on the VAT to the Revenue.
The officer then became aware of the error of his guidance regarding the zero rating of elements of the scaffolding, and realised VAT was due on erection and dismantling.
The tax was obtained from one contractor and paid to HMRC, but the other contractor had by this time gone into administration, meaning the taxpayer was unable to collect the extra tax through a VAT-only invoice.
HMRC said the VAT remained due and the taxpayer company was responsible for payment. The firm appealed.
The First-tier Tribunal sympathised with the business's predicament but said the problem originated from the taxpayer accepting incorrect self-billing.
Had one contractor not gone into administration, the VAT may well have been obtained, but this reason was not sufficient for HMRC to operate VATA 1994, s 29 and pursue the contractor, rather than the subcontractor, for the outstanding tax. The taxpayer should pay the VAT due.
The tribunal judge suggested it may be appropriate for the Revenue to take into account its officer’s incorrect advice concerning zero rating if the department decided to charge interest or penalties.
The taxpayer’s appeal was dismissed.
Independent VAT consultant Neil Warren pointed out two learning points from the case. First, ‘a supplier has the responsibility for getting the VAT liability right on all its income sources. It is not acceptable to rely on a customer, even where the customer is raising a self-billed invoice.’
Second, ‘in the case of a new charitable building, such as a church or new building for a relevant residential purpose, it is only the services of a main contractor that are zero rated, not those of subcontractors working for the main contractor’.
__________________
 
timthumb said:
Gemini Riteway Scaffolding Ltd (TC2053)

The taxpayer company was subcontracted to provide scaffolding for halls of residence at two universities. Haymills and Leadbitters were the main contractors.
In December 2007, HMRC visited the taxpayer and found it had not accounted for VAT on supplies made to the contractors, because neither had included VAT in the self-billed invoices they issued retrospectively to the subcontractor.
The VAT officer advised the taxpayer that, although the hire of scaffolding must be standard rated, supplies of erection and dismantling of scaffolding should be zero rated when the project was the construction of a university hall of residence. A fair and reasonable apportionment was required.
The advice was incorrect: under VATA 1994, Sch 8 group 5, zero rating only applies where such services are supplied ‘in the course of construction’. Only the main contractor makes supplies in the course of construction, a subcontractor does not and, as a matter of law, all its supplies should be standard rated.
The VAT officer suggested the taxpayer submit VAT-only invoices to the contractors, which it did, and passed on the VAT to the Revenue.
The officer then became aware of the error of his guidance regarding the zero rating of elements of the scaffolding, and realised VAT was due on erection and dismantling.
The tax was obtained from one contractor and paid to HMRC, but the other contractor had by this time gone into administration, meaning the taxpayer was unable to collect the extra tax through a VAT-only invoice.
HMRC said the VAT remained due and the taxpayer company was responsible for payment. The firm appealed.
The First-tier Tribunal sympathised with the business's predicament but said the problem originated from the taxpayer accepting incorrect self-billing.
Had one contractor not gone into administration, the VAT may well have been obtained, but this reason was not sufficient for HMRC to operate VATA 1994, s 29 and pursue the contractor, rather than the subcontractor, for the outstanding tax. The taxpayer should pay the VAT due.
The tribunal judge suggested it may be appropriate for the Revenue to take into account its officer’s incorrect advice concerning zero rating if the department decided to charge interest or penalties.
The taxpayer’s appeal was dismissed.
Independent VAT consultant Neil Warren pointed out two learning points from the case. First, ‘a supplier has the responsibility for getting the VAT liability right on all its income sources. It is not acceptable to rely on a customer, even where the customer is raising a self-billed invoice.’
Second, ‘in the case of a new charitable building, such as a church or new building for a relevant residential purpose, it is only the services of a main contractor that are zero rated, not those of subcontractors working for the main contractor’.
__________________
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Still nothing wrong with the system. Scaffolders payment application(s) should have shown the vat to be paid with each interim submited from the start. The first payment recieved excluding vat should have rang alarm bells. Letter should have been sent pointing out vat is applicable and a 7 day notice to suspend work should have been issued and acted upon. Vat note 708 for construction is clear on the tax liability for contract scaffolding. Also the contractor can reclaim his tax from HMRC each quarter if he has exempt status. All main contractors know this but there are some dodgy ones who try it on to relieve cash flow on their ailing companies.
 
Self billing needs the PC to issue annually an agreement
Many companies operate an unofficial self billing system even though they do not have HMRC authority
They then fail to pay the supplier the VAT or not at the right time and if the sh1t hits the fan its down to the subbie to pay the liability
(See gemini above)
Make sure your application includes vat and if they fail to pay, send them a written reminder that they are liable
 
thanks for your help on this chaps
i have now updated my request to the company for further details and the reply was it was not a requirement to sign up to their self billing it is a new system to them and certain trades would not have variation or additional cost

---------- Post added at 10:02 AM ---------- Previous post was at 09:35 AM ----------
timthumb said:
Gemini Riteway Scaffolding Ltd (TC2053)

The taxpayer company was subcontracted to provide scaffolding for halls of residence at two universities. Haymills and Leadbitters were the main contractors.
In December 2007, HMRC visited the taxpayer and found it had not accounted for VAT on supplies made to the contractors, because neither had included VAT in the self-billed invoices they issued retrospectively to the subcontractor.
The VAT officer advised the taxpayer that, although the hire of scaffolding must be standard rated, supplies of erection and dismantling of scaffolding should be zero rated when the project was the construction of a university hall of residence. A fair and reasonable apportionment was required.
The advice was incorrect: under VATA 1994, Sch 8 group 5, zero rating only applies where such services are supplied ‘in the course of construction’. Only the main contractor makes supplies in the course of construction, a subcontractor does not and, as a matter of law, all its supplies should be standard rated.
The VAT officer suggested the taxpayer submit VAT-only invoices to the contractors, which it did, and passed on the VAT to the Revenue.
The officer then became aware of the error of his guidance regarding the zero rating of elements of the scaffolding, and realised VAT was due on erection and dismantling.
The tax was obtained from one contractor and paid to HMRC, but the other contractor had by this time gone into administration, meaning the taxpayer was unable to collect the extra tax through a VAT-only invoice.
HMRC said the VAT remained due and the taxpayer company was responsible for payment. The firm appealed.
The First-tier Tribunal sympathised with the business's predicament but said the problem originated from the taxpayer accepting incorrect self-billing.
Had one contractor not gone into administration, the VAT may well have been obtained, but this reason was not sufficient for HMRC to operate VATA 1994, s 29 and pursue the contractor, rather than the subcontractor, for the outstanding tax. The taxpayer should pay the VAT due.
The tribunal judge suggested it may be appropriate for the Revenue to take into account its officer’s incorrect advice concerning zero rating if the department decided to charge interest or penalties.
The taxpayer’s appeal was dismissed.
Independent VAT consultant Neil Warren pointed out two learning points from the case. First, ‘a supplier has the responsibility for getting the VAT liability right on all its income sources. It is not acceptable to rely on a customer, even where the customer is raising a self-billed invoice.’
Second, ‘in the case of a new charitable building, such as a church or new building for a relevant residential purpose, it is only the services of a main contractor that are zero rated, not those of subcontractors working for the main contractor’.
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well this one has thrown the cat amongst the pigeons
we worked for a "charity" council and always charged vat as for we worked directly for them, granted it was 18 months ago they always paid inclusive of vat would we still have been seen as sub contractors and correct or what:unsure:
 
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