HMRC and the Department for Trade and Industry launched a joint consultation on 13 February 2025 regarding the implementation of e-invoicing in the UK.
What is E-invoicing
E-invoicing refers to the process of creating, sending, receiving, and processing invoices in a digital format. Unlike a digital version of a paper invoice, e.g. a PDF, an e-invoice refers to a structured datafile that can automatically be read by the recipient’s computer system. This usually means in an XML format, or a variant of.
Tax authorities around the world are increasingly mandating e-invoicing to combat VAT fraud and enhance revenue collection. To date, circa 130 countries have either implemented, or are in the process of implementing, e-invoicing standards. E-invoicing can allow tax authorities to receive real-time, or near real-time, data on taxable transactions, giving them greater visibility into business activities and enabling faster and more effective auditing processes.
E-invoicing is not currently mandatory for B2B supplies in the UK. However, it is already used by businesses in the UK who want to take advantage of the commercial benefits that e-invoicing offers. The government state in their consultation that businesses that move to e-invoicing can reduce invoice process costs by 60-80%
What does the consultation say?
This consultation invites interested parties to share their experiences of different e-invoicing systems. The consultation does not favour a specific e-invoicing standard but does highlight that invoices issued to NHS England must already be issued using the Pan-European Public Procurement On-Line (PEPPOL) network.
E-invoicing can allow tax authorities to receive real-time, or near real-time, data on taxable transactions, giving them greater visibility into business activities and enabling faster and more effective auditing processes.
"The consultation does appear to dismiss the adoption of a centralised model that requires all invoices to be processed via a centralised government platform; stating that such an approach is “costly for tax authorities to implement, and we do not plan to explore this model in detail”."
Instead, the consultation favours a decentralised 4-corner model. This model sees the supplier (corner 1) issue an invoice via their e-invoicing access point (corner 2), which is received by the customer’s access point (corner 3) and sent to the customer (corner 4). The benefit of the 4 corner model is that there does not need to be a unique point-to-point connection between the supplier and the customer.
The consultation also considers that a potential 5th Corner, HMRC, could be added at a later date. This would allow invoice data to be shared in real, or near real-time with HMRC and even open up the possibility of pre-populated VAT returns.
What will happen next?
The consultation is due to run for 12 weeks until 7 May. It will then take time for the government to define the legal and technical requirements with the possibility that an announcement regarding a preferred approach and timeline could be made in the Autumn Budget.
Businesses will then need sufficient time to build, test and implement new IT systems which are capable of producing and processing e-invoices. Based on other countries that have adopted e-invoicing, this entire process is likely to take 3 -4 years, making a go-live date of 1 Jan 2030 a possibility.
What should businesses do now
Whilst the details are not yet known, it does appear inevitable that the UK will introduce mandatory e-invoicing in the near future. Businesses should therefore start to undertake readiness assessments to understand the level of work that will be required to move to e-invoicing and possible real-time reporting. Particular focus should be placed on the quality of existing static data and tax logic that is used to process invoices.
