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The government has launched a consultation on invoicing which runs from 13 February 2025 to 7 May 2025 seeking views on standardising e-invoicing and how to increase its adoption. The consultation is a collaboration between HMRC, and the Department for Business and Trade so is not purely focused on VAT. The government wants to understand how different approaches to e-invoicing will integrate with existing business systems and is seeking views to inform future decision making on what should be introduced.
E-invoicing is currently permitted in the UK but there is no common standard and it is only compulsory for suppliers to NHS England who must use the Pan-European Public Procurement On-Line (PEPPOL) network. The consultation defines e-invoicing as the digital exchange of invoice information directly between buyers’ and suppliers’ financial systems – it confirms that sending a pdf by email is not e-invoicing as it involves manual intervention. The government’s view is that current take up is generally low despite the numerous benefits that e-invoicing offers.
There are a number of e-invoicing models in operation around the world with differing levels of complexity. HMRC have ruled out one model which would involve them building a centralised system through which all e-invoices would be issued – this is on the grounds of cost and complexity. Therefore, the model to be introduced is likely to be a de-centralised model where businesses would be free to choose their own software provider who would provide an e-invoicing solution.
The government is also seeking views on whether real time reporting and CTC should be introduced at the same time as e-invoicing. These systems are in place in many countries around the world and will be standardised across the European Union because of the recently approved VAT in the Digital Age (ViDA) package. They can only be introduced if e-invoicing is mandated as they require standardised data to be submitted by all companies that are covered by the mandate.
Currently HMRC receives no information about the underlying transactions that make up a VAT return despite the introduction of Making Tax Digital (MTD) – the VAT return only requires the total figures to be declared which is no different from the position when paper returns were submitted. If HMRC want more visibility, they must carry out an inspection. While HMRC were given more staff in the Autumn Budget to carry out visits, this is still an inefficient way of ensuring that businesses are being VAT compliant. The introduction of CTC would mean that HMRC would receive full transactional data on a real or near-real time basis which would allow them to target non-compliance more efficiently. Most countries that have introduced such systems have seen their VAT gap fall generating more funds for the government.
We would encourage all businesses to respond to the consultation so that your voice is heard – in our view, e-invoicing and CTC will definitely be introduced in the near future so it is important that the government receives a wide range of views. Crowe will be responding to the consultation and we would be pleased to incorporate your feedback into our response so please get in touch if you have any thoughts or comments on the consultation, but do not want to make an individual submission.
For further information on anything discussed in this article, please contact Rob Janering, or your usual Crowe contact.
