This initiative aims to standardise e-invoicing and increase its adoption, potentially transforming business processes and tax reporting. Here, we focus on HMRC’s specific commitments and non-commitments as outlined in the consultation document.
While the UK might be relatively late to the e-invoicing stage, the UK Government has used this to its advantage by adopting a wait-and-see approach. The consultation keeps most e-invoicing approaches on the table for UK businesses.
At this stage, HMRC and DBT appear to want feedback from everyone – businesses of all sizes, interest groups, representative bodies, and individuals. They’re planning business round tables and other events to ensure they hear from a diverse group of stakeholders and presumably take on their views and knowledge to make the best decision for the UK.
The consultation aims to make it easier for businesses to adopt e-invoicing by cutting setup and running costs and ensuring the systems are easy to implement and use. They’ll consider how different e-invoicing approaches can fit with businesses’ existing systems. Cutting costs might be more of a long-term aim than a short-term one.
By pushing for e-invoicing, HMRC aims to boost business productivity, improve cash flow, and reduce administrative burdens. The consultation highlights how e-invoicing can streamline processes, reduce errors, and enhance tax reporting accuracy.
Another key driver for the tax department is the importance of secure digital data exchange to cut down on invoice fraud. E-invoicing systems will include validation protocols, audit logs, and strict security measures to protect invoice data.
With the introduction of the EU’s VAT in the Digtial Age (ViDA) package late last year, EU businesses will be adopting e-invoicing over the next couple of years, and the UK’s first step was inevitable in keeping UK businesses competitive and at the forefront of digitalisation.
The UK’s late mover position comes with the benefit of being able to evaluate various e-invoicing models, both voluntary and mandated, to figure out what works best for the UK. It is welcomed that HMRC and DBT will weigh up the pros and cons of each model to arrive at the best answer for UK businesses.
While they’re exploring the idea of standardisation, HMRC and DBT aren’t committing to a specific e-invoicing standard just yet. They’re focusing on gathering views on how standards could support e-invoicing adoption and interoperability. However, HMRC isn’t planning to dive deep into a centralised e-invoicing model. They prefer decentralised models that offer more flexibility and align with current business practices. They have also noted the use of the standard Pan-European Public Procurement Online (PEPPOL) in NHS procurement, hinting at this as a possible standard that may be adopted.
Although the consultation talks about real-time reporting and Continuous Transaction Controls (CTC), HMRC and DBT aren’t committing to these features right away. They want to understand stakeholder views and the feasibility of such systems first.
HMRC and DBT make it clear that there won’t be any immediate changes based on this consultation. The feedback they gather will guide future decisions, but no policy shifts are planned right away, and the consultation runs until 12 May. We expect a period of time will be required to evaluate the responses, form policy, and legislate for any potential move in this area. Following this timeline, we don’t expect detailed output until the beginning of 2026 at the earliest. It would then be reasonable to expect some degree of implementation period or phased ramping up period from the initial announcement.
HMRC’s consultation on e-invoicing is a big step towards modernising business processes and tax reporting in the UK. By engaging with stakeholders, exploring different models, and supporting adoption, HMRC aims to create a framework that benefits businesses and the economy. However, they’re also being cautious and not rushing into commitments, ensuring a balanced approach to policy development.
While this might appear some way off from being implemented, businesses need to have this on their transformation/change radar as it will be a big shift in tax and finance departments' processes. Businesses should be mapping out their current invoice – finance system – VAT return journey right now, and exploring ERP, process, controls, and automation improvements both as part of business as usual and in preparation for upcoming e-invoicing changes.
For more insight and guidance in this area, get in touch with Adam Scoggins and Alex Miller.
