E-invoicing in the UK: HMRC and DBT issue open consultation

E-invoicing involves the creation, exchange, verification, and storage of invoices in a structured electronic format between suppliers and buyers. This is highly disruptive for businesses, as current finance functions tend to heavily rely on the (manual) issuing and processing of paper-form invoices in a human readable format such as PDF. Not raising e-invoices therefore equals not getting paid and non-compliance. As a result, businesses will have to adopt a means of being able to both issue and receive e-invoices.

The global trend is shifting towards widespread adoption of e-invoicing, as it can significantly reduce administrative tasks, improve cash flow, boost productivity, and introduce automation, thereby helping to close the tax gap. Currently, the UK adopts a voluntary e-invoicing approach except where NHS England suppliers are required to issue invoices under the so called PEPPOL (Pan-European Public Procurement On-Line) network. The move towards wider adoption of e-invoicing is a positive development for the UK's economic landscape and it aligns with initiatives like the UK’s making tax digital (MTD) and EU’s VAT in the Digital Age (VIDA). 

Implementations by nations across the globe have demonstrated tax revenue boosts from their e-invoicing implementations. Unlike traditional paper invoices or simple digital versions like PDFs, e-invoices are designed for seamless integration between financial systems. UK businesses can benefit from this with faster automated invoice processing, reduced errors, and improved relationships with trading partners due to more transparent and efficient transactions.

The aim of HMRC and DBT’s consultation is to understand the impact for UK businesses of different models of e-invoicing, whether to take a mandated or voluntary approach to e-invoicing, what the scope would need to be and whether e-invoicing should be complemented by real time digital reporting. They are particularly interested in how different e-invoicing approaches align with various business operations, what challenges businesses face in adopting wider electronic invoicing and how to make the transition smoother. This will support development of a UK approach to e-invoicing that improves business productivity by reducing admin burdens and helping businesses to get their tax right.

This is a major development for UK businesses and although the consultation refers to a voluntary option, we believe that it is more a question of when and how rather than if mandatory e-invoicing will be introduced. We see e-invoicing as a crucial milestone in the digitalisation of the UK tax system, albeit it being disruptive to current finance, tax and enterprise resource planning (ERP) processes.

The consultation period runs until 7 May 2025, providing a platform for stakeholders to share their perspectives and inform future policy development. Participation in the consultation process is being sought by HMRC and the DBT from all stakeholders, including interest groups, representative bodies, industry bodies and individuals regardless of whether or not they use e-invoicing. This is an important opportunity whereby those stakeholders can contribute to the future policy development of e-invoicing in the UK and influence how this important digital technology development takes shape in the UK.