UK launches 13 Feb 2025 a 12-week consultation on e-invoicing & digital reporting; Proposal by Nov 2025
A combined UK HMRC and Department for Business & Trade has launched on 13 February a public consultation on standardising or even mandating B2G and B2B e-invoicing.
The purpose of the consultation is to gather views on standardising e-invoicing and how to increase adoption of e-invoicing across UK businesses and the public sector. Currently, businesses may adopt e-invoices instead of paper invoices without approval or notification to HMRC. B2G invoicing to the NHS is regulated.
The consultation evaluates:
- opinions on centralised vs decentralised models (4-corner and 5-corner model)
- voluntary vs mandatory policy
- how much time needed to prepare for a mandate
- awareness and adoption of e-invoicing
- govt submissions via e-invoicing or real-time e-reporting
- potential for pre-filled VAT returns, and should these be only voluntary
UK e-invoicing mandate by 2030?
The timetable for any launch would likely be as follows (my estimate!):
- 13th Feb – 7th May 2025: public consultation for businesses, trade associations, tech vendors etc to submit their views on the design and timetable of any regime;
- Jun to Oct 2025: review and clarifications of submissions; develop UK e-invoicing framework proposal;
- Nov 2025: announcement of proposed regime at UK Chancellor of the Exchequer’s Autumn Budget;
- 2030 potential full mandate launch, allowing / estimating for:
- 2026-7: legal and technical specifications development, including a number of round of consultation; and
- 2028-9: build, test and pilot phases.
UK open to ideas on design and mandatory elements of proposal
Currently, there is no obligation to use B2B e-invoicing. For B2G, only sales invoices to NHS bodies must use EN16931 format based e-invoicing via Peppol network access points. All public bodies must be able to accept structured e-invoices if their supplier prefers.
There is certainly no pre-determined model, and the consultation will aim to gather ideas on the most flexible design to secure the efficiency for businesses (e.g. speedy invoice payments) and tax collection objectives for all parties. In terms of model, it is unlikely the UK will favour an invasive pre-clearance government e-invoicing, and instead promote voluntary standards, including PEPPOL.
The UK could look to the widely-praised Belgium 2026 and 2028 two-staged plan:
- 4-corner model: firstly mandating structured e-invoicing between businesses with PEPPOL option as a 4-corner model;
- 5-corner model: at a later date, adding digital reporting to HMRC of summary e-invoice information.
HMRC had hinted at an e-invoicing mandate in October 2023 when looking at stubborn e-commerce VAT fraud.
HMRC has already adopted the EU invoicing standard EU Directive 2011/55/EU and the EN16931 format.
UK taxpayers may already voluntarily use electronic invoices on B2B transactions if they have mutual agreement between parties. An e-invoice contains the same information as a paper invoice, but is in a structured, machine readable electronic format. HMRC’s Making Tax Digital for VAT introduced VAT return digital filing in 2019, followed by 2021 digital journey requirements for preparing VAT returns.
EU member states already raising billions with digital reporting
The EU is considering a single standard via its VAT in the Digital Age reforms. Countries such as Italy have already demonstrated major tax revenue boosts from their e-invoicing implementations. Countries such as France, Germany, Poland and Belgium have their own domestic versions launching shortly.
The introduction of e-invoicing can significantly reduce administrative tasks, improve cash flow, boost productivity, introduce automation, and reduce errors in tax returns – all helping to close the tax gap. The consultation will gather input from businesses on how HMRC can support investment in and encourage e-invoicing uptake.
E-invoicing to fight VAT evasion
The UK Treasury is keen to tap into the ability of e-invoicing to uncover tax evasion, and help close the national deficit.
E-invoicing, which originated in South America, can help tax authorities detect tax fraud by providing real-time access to transaction data, ensuring greater transparency. Each invoice is digitally authenticated with unique identification numbers and timestamps, reducing the risk of duplication or manipulation. This system allows tax authorities to track the movement of goods and services across the supply chain, ensuring that businesses accurately report sales and input tax credits. It also helps match reported invoices between buyers and sellers, flagging discrepancies for further investigation. By automating tax reporting, e-invoicing minimizes errors, increases compliance, and makes fraudulent activities like underreporting or fake invoicing easier to detect.
UK e-invoicing rules still follow EU VAT
The UK’s e-invoice rules are primarily shaped by VAT regulations and efforts to align with digital business practices. E-invoicing is allowed but not mandatory in the UK, and its usage is oversee by HMRC. Businesses must ensure that e-invoices meet the same legal requirements as paper invoices, including essential details such as supplier and customer information, VAT number, description of goods or services, total VAT due, and invoice date.
To be valid, an e-invoice must be authentic, intact, and legible. Authenticity refers to verifying the origin of the invoice, integrity ensures no alterations, and legibility means that the invoice can be easily read, both when sent and stored.
Storage requirements also apply, and invoices must be kept for six years in a format that guarantees access, readability, and retrieval. The UK has embraced the EU’s VAT Invoicing Directive, which allows electronic and paper invoices to be treated equally for tax purposes. Although the UK left the EU, these guidelines continue to apply, supporting businesses’ transition to digital systems. Moreover, MTD initiative encourages businesses to adopt digital tools, including e-invoicing, for VAT compliance.
