Rachel Reeves has fired the starting gun on the UK introducing e-Invoicing

The Chancellor has used the Labour party conference to announce that the government wants to promote the wider use of electronic invoicing (‘e-invoicing’) across UK businesses and government departments. HM Revenue & Customs will shortly be launching a consultation on the introduction of ‘e-invoicing’.

What is e-invoicing?

E-invoicing refers to the process of creating, sending, receiving, and processing invoices in a digital format. Rather than 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. E-invoicing allows 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. These benefits include:

• Reduced cost – the cost of producing and sending an e-invoice is a fraction of the paper based equivalent.
• Reduction in time – the number of invoices that an AP team can process in an hour is significantly increased.
• Reduction in errors – there is less chance of errors, as manual keying of data is removed.
• Secure transmission – e-invoices are shared as a secure and encrypted file.
• Environmental – e-invoices avoid production and postage of paper-based invoices.
• Immediacy – data is immediately available in the business’s ERP, with no delay due to human data entry.

What are other countries doing?

E-invoicing started in South America and, over the past decade, has been spreading across the world, with Malaysia being the latest country to go-live with mandatory e-invoicing in August 2024.

Closer to home, several European countries have either introduced, or are in the process of introducing, e-invoicing requirements. Germany, Spain, France, Belgium and Estonia all have announced their intention to implement mandatory e-invoicing over the next 2 years.

The EU is intending to introduce mandatory EU-wide e-invoicing as part of its VAT in the Digital Age reforms. These reforms, however, have been stalled and don’t look like they will happen before 2030, at the earliest.