On 13 February 2025, His Majesty's Revenue and Customs (HMRC) and the Department for Business and Trade (DBT) published the UK e-invoicing consultation (Consultation).

Comments are being accepted until 7 May 2025.

Background

Implementing e-invoicing in the UK would be a significant step forward in the UK VAT system's approach to digitalization, which currently operates Making Tax Digital (MTD) for VAT requirements. These requirements focus on automating the VAT return submission process, as well as introducing digital-journey requirements to remove the manual processes that many businesses operated as standard, with the aim of reducing VAT errors along the way. However, making tax digital does not constitute real time digital reporting, as implemented in several other jurisdictions around the world.

The Consultation marks the start of the UK's transformational VAT digitalization journey and provides businesses with an opportunity to provide their views on the design and scope of a UK e-invoicing regime.

If implemented, e-invoicing will have a significant impact across business-critical systems, technology and finance processes, and all businesses operating in the UK will need to make sure they are able to comply. Noncompliance could render a business unable to issue invoices to customers (or receive invoices from suppliers).

Key points of the Consultation

The Consultation states that its purpose is to seek input from a range of stakeholders on how the UK government can support the increased adoption of e-invoicing.

Topics that the UK government is interested in exploring include:

• Different models of e-invoicing
• Whether to take a mandated or voluntary approach to e-invoicing
• What scope of mandate might be most appropriate in the UK and for businesses
• Whether e-invoicing should be complemented by real-time digital reporting

The Consultation outlines the benefits of implementing e-invoicing, referring in particular to reducing costs and the administrative burden, enhancing visibility, improving processing times and business cash flow, and reducing errors.

The Consultation makes clear that the UK is not looking to identify a specific standard or standards to adopt but is seeking broader views on how those standards could be used to support e-invoicing adoption and increase the potential benefits.

The Consultation provides no defined timeline for the adoption of e-invoicing in the UK, and even implies that a final decision has not been made on whether its findings will be implemented. What is clear at this stage is that the UK government is keen to consult collaboratively to develop a system that delivers benefits for businesses. The government states that consulting with the software and accounting sectors to assess existing standards and develop a UK regime will be a step toward enabling the development of an appropriate timeline for introducing new standards and any requirements around them.

It is also worth noting that the Consultation does not comment on any interaction with the introduction of split payments, which is a workstream that HMRC has been exploring separately.

What should businesses do now?

The UK e-invoicing Consultation provides an opportunity for businesses to provide their views on the proposed UK e-invoicing regime and offer lessons learned from experiences of implementing regimes in other countries. When timelines of implementation are clearer, they should provide a roadmap to support businesses internally with their readiness planning.

In countries where e-invoicing is live or about to go live, adopting a holistic approach to readiness planning is important. At a minimum, this approach should address good data quality, involving the tax function early on with relevant stakeholders, including information technology (IT) and finance, and implementing workstreams to identify the right technology for the business.