Recently, a joint consultation on UK electronic invoicing (e-invoicing)* was published by HMRC and the Department for Business and Trade. They are seeking businesses’ views on the potential standardisation and adoption of e-invoicing.
Benefits of E-Invoicing for Tax Compliance
HMRC and the Treasury think that the adoption of e-invoicing between business customers and suppliers is a tool that will support the tax reporting and compliance processes. This consultation, combined with the current Government’s drive towards digitisation, makes it likely that any proposals resulting from the consultation will be adopted. HMRC views electronic invoicing as beneficial for improving tax compliance, which further supports this likelihood.
Alignment with EU E-Invoicing Systems
This would also bring the UK more in step with EU member states as they seek to adopt more advanced e-invoicing systems. Especially now the EU countries have all agreed and adopted the VAT in the Digital Age (“ViDA”) proposals. They are progressing towards an EU-wide e-invoicing system from 2030.
Approaches and Effects of E-Invoicing
The consultation is looking at the different approaches to e-invoicing and the potential effect on businesses going forward. Ultimately HMRC are looking to adopt a system that will reduce any admin burdens on business while at the same time increasing VAT/tax compliance.
Key Questions Addressed in the Consultation
The consultation is seeking to address a number of questions primarily round:
- the variety of different e-invoicing methodologies;
- whether any change to e-invoicing should be on a voluntary or compulsory basis;
- if compulsory, how would this be legislated and enforced; and
- how can the existing making tax digital VAT reporting be enhanced/strengthened with e-invoicing and the potential for real time digital reporting.
Timeline and Adoption of E-Invoicing
Whilst the consultation document indicates any timeline and stresses that no decision has yet been made on whether or how e-invoicing should be taken forward. The direction of travel towards e-invoicing is obvious, and as the consultation notes many countries already have adopted e-invoicing in some manner.
Support for Businesses
The consultation also seeks views on what would be a realistic timeline for adoption and what support businesses would require to make this change in business reporting.
Consultation Period
The consultation runs until 7 May 2025 and should you wish to respond, then any responses should be sent direct to einvoicingconsultation@hmrc.gov.uk.
Future of E-Invoicing in the UK
Whilst this is obviously just the first stage in what could be a potentially lengthy process aimed at deciding how the UK should introduce a standardised e-invoicing system. Much like when MTD for VAT was first announced, e-invoicing is definitely on the horizon and in our view will ultimately be introduced. Clients may wish to take HMRC up on their offer and input into the consultation.
The full consultation document can be found here: Promoting electronic invoicing across UK businesses and the public sector
* E-invoicing is the digital exchange of invoice information directly between buyers’ and suppliers’ financial systems, even if these systems are different. The outcome is an invoice which is automatically written into the buyer’s financial system without manual processing.
E-invoicing automates the exchange of invoices between buyers and suppliers. Increased e-invoicing uptake may support economic growth, business productivity, improve business cashflow and reduce errors in tax returns. It has the potential to both support businesses and tax administration.
