Self-Bill Invoicing for Drivers: What HMRC Actually Requires

Most multi-contract operators pay self-employed drivers by self-billing: you raise the invoice on the driver's behalf, rather than waiting for them to send one in. Done properly it is faster, cleaner and easier to reconcile. Done loosely it is a compliance risk that sits quietly in your records until someone asks. Here is what HMRC actually expects.

What self-billing is

Self-billing is an arrangement where you, the customer, prepare the supplier's invoice and send it to them with the payment. For a DSP paying dozens or hundreds of drivers across different contracts and rates, it removes a mountain of chasing and manual entry. But the responsibility for getting the invoice right sits with you.

The agreement comes first

You cannot self-bill someone without their agreement. HMRC requires a self-billing agreement in place with each supplier before you raise a single self-billed invoice. The agreement must be signed by both parties, and it needs to be reviewed regularly, normally at least every twelve months, and renewed if the arrangement continues.

If a driver's circumstances change, particularly their VAT status, the agreement has to be kept current. An expired or out-of-date agreement is one of the most common ways operators fall out of compliance without realising.

What has to be on the invoice

A self-billed invoice has to carry the same detail as a normal one, plus a few specifics:

• It must be clearly marked as a self-billed invoice.
• It must show the supplier's name, address and, where they are VAT registered, their VAT registration number.
• It must reflect the correct VAT treatment for that supplier.

That last point matters. If you treat a VAT-registered driver as if they were not, or the other way round, the figures are wrong and so is your VAT position.

Keep the records

You need to keep a record of every supplier who has agreed to self-billing, along with their VAT details, and be able to produce the signed agreements. The audit trail is the point. If you can show the agreement, the invoice and the payment all line up, a query is a five-minute job. If you cannot, it is a problem.

The common mistakes

• Agreements that were signed once and never reviewed.
• New drivers paid by self-bill before an agreement is in place.
• VAT status assumed rather than checked and kept current.
• Invoices that are not marked as self-billed, or are missing the supplier's details.
• No central, retrievable record of who agreed to what, and when.

None of these are hard to avoid. They happen when self-billing is run on spreadsheets and goodwill rather than on a system that captures the agreement at onboarding and keeps the invoice, the rate and the record together.

The simple version

Get the agreement signed during onboarding. Review it every year. Mark the invoices correctly, keep the VAT status current, and keep everything retrievable. Do that and self-billing does exactly what it should: it pays drivers correctly and quietly, and it stands up the day someone checks.

This is a general guide to the principles, not tax advice. For the detail, see HMRC's guidance on self-billing (VAT Notice 700/62) or speak to your accountant.