Guides · Driver Pay
HMRC self-billing for courier companies, explained
By the Qinetic team · Updated July 2026
If you pay subcontractor drivers, self-billing is almost certainly how you do it — or how you should. It flips the normal invoicing direction: instead of forty drivers each sending you an invoice in forty formats, you raise the invoice on their behalf from the work they completed. Done properly it's cleaner for everyone. Done casually it creates VAT problems that surface at the worst possible time.
What self-billing actually is
In a self-billing arrangement, the customer (your courier company) prepares the invoice for the supplier (the driver) and sends them a copy, usually with payment. The driver doesn't invoice you at all. For courier operations paying per day or per job, it's the only arrangement that scales — the work data is already in your system, so the invoice should come from it.
What HMRC expects you to have
For VAT purposes, self-billing is a formal arrangement with conditions set out in HMRC's guidance (VAT Notice 700/62). The essentials: a signed, written self-billing agreement with each supplier before you self-bill them — without it, your self-billed invoices aren't valid VAT invoices and you can't reclaim the input tax. The agreement must carry an expiry date, usually 12 months (or the end of the contract), and be reviewed and renewed when it expires. Self-billed invoices must show the driver's name, address, and VAT registration number, and carry the exact statement "The VAT shown is your output tax due to HMRC". You must keep records of every supplier who has agreed — names, addresses, VAT numbers.
Status changes matter too: if a driver gets a new VAT registration number, you must not issue further self-billed invoices until a new agreement is in place. If they deregister from VAT, you can keep self-billing them — but without VAT, because the arrangement is no longer within the VAT regulations. All of which means you need to actually know each driver's current status, not the status they had when they signed.
Where courier operators get caught out
Three failures come up again and again. First, no signed agreement — the statements go out for years and nobody can produce the paperwork when asked. Second, stale VAT status — a driver deregisters, the statements keep showing VAT, and the reclaim position unravels. Third, rate drift — the rate in the spreadsheet doesn't match what was agreed, so statements are quietly wrong and drivers dispute them after the fact. None of these are exotic; they're all filing problems.
The pay run itself
A clean self-billing cycle looks like this: work is logged (days or jobs at the driver's agreed rate), the statement is generated from that work, deductions like PCN recharges are applied with their evidence, the driver sees the statement, and the batch payment goes out. The failure mode is running each of those steps in a different tool — jobs in one system, rates in someone's head, deductions in a spreadsheet, payments in the bank portal — and reconciling by hand every week.
Qinetic runs that entire loop in one place: rate cards per driver, self-bill invoices generated each period with HMRC self-billing supported, and payments sent directly to drivers from Qinetic — without manually creating each payment in online banking.
Common questions
Do I need a self-billing agreement with every driver, even non-VAT-registered ones?
The formal VAT conditions apply where both parties are VAT-registered — and you never add VAT to self-billed invoices for unregistered drivers. But holding a signed agreement with every self-billed driver is best practice regardless: it's also your recharge and rate-card paper trail.
Does self-billing affect employment status?
Self-billing is an invoicing arrangement, not a status determination. Whether a driver is genuinely self-employed depends on the reality of the engagement — take advice if you're unsure, because the consequences of getting status wrong dwarf any invoicing question.
What happens if a driver disputes a statement?
The statement should answer for itself: the days or jobs, the rate that applied, and any deduction with its evidence. Most disputes are really visibility problems — drivers who can see their statement rarely need to call the office.
This guide is general information, not tax or legal advice. Sources: GOV.UK — VAT: self-billing arrangements and VAT Notice 700/62. Confirm your arrangements with your accountant.
Days and jobs become invoices. Invoices become payments.
Self-bill statements generated from logged work and payments sent directly to drivers from Qinetic — in one system.