The government has unveiled a proposal to expand electronic invoicing across the UK and hinted at a forthcoming ‘Digital Transformation Roadmap’ for HM Revenue & Customs (HMRC). However, the details about both plans are currently limited. The chancellor wants businesses to move to “e-invoicing” as part of the process.
In her first speech as Chancellor at the Labour Party conference, Rachel Reeves announced measures to improve productivity, reduce fraud, and close the tax gap. As part of this movement, HMRC plans to launch a consultation on electronic invoicing (e-invoicing) to encourage its wider use among UK businesses and government departments.
If a consultation is being launched, we know the government is serious about it.
What is “e-invoicing”
E-invoicing involves creating, exchanging, verifying, and storing invoice documentation between a supplier and a buyer in a structured and standardised electronic format. It differs from the traditional paper version.
What’s more, it goes beyond simply emailing a PDF or Word invoice or scanning a paper invoice into digital form. Currently, in the UK, “e-invoicing” is not mandatory between businesses; it’s up to you if you want to do it. However, it is clear that the Chancellor wants businesses to move to “e-invoicing” for all businesses. At what speed, we are not yet sure.
A statement released after the Chancellor’s speech last week stated that there will be a consultation seeking business feedback on how HMRC can promote e-invoicing uptake. While no official date has been announced, more information is expected to be available in the Autumn Budget
Fans of e-invoicing highlight its potential to:
- process invoices faster and with fewer errors,
- eliminate invoice duplication,
- prevent fraudulent activity,
- streamline the audit and reporting process.
How do we compare with other countries in Europe?
Despite the UK’s initial reluctance after leaving the EU, we now seem ready to consider adopting the new digital process.
E-invoicing is crucial in the European Union’s ‘VAT in the Digital Age’ reforms. This format is also already established in many South and Latin American countries.
Several European nations are making progress in implementing e-invoicing. For example, Germany will begin a three-year phased introduction of e-invoicing starting 1st January next year. Belgium, France, and Poland will do the same in 2026. The EU is working towards introducing a ‘harmonised’ version of the plans by July 2030.
The UK government has not yet revealed the specific e-invoicing model it is considering. It is unlikely to adopt a ‘pre-clearance’ government e-invoicing system, which would slow down the whole process and be bad for business.
Instead, it may introduce voluntary standards with digital reporting of summary information to HMRC at a later stage. At this point, there is no mention of e-invoicing becoming mandatory for businesses.
However, the introduction of “e-invoicing,” albeit by choice, initially fits well with the coming of the Making Tax Digital (MTD) regime for Income Tax. Remember it is already here for VAT.
What’s happening with the Making Tax Digital Program?
The MTD program has been delayed a few times, but we’re hoping HMRC will go ahead with it in April 2026. They’ve already started testing the scheme and are looking for more taxpayers to join in. If you’re interested in being a trailblazer, just give your manager a heads-up!
Remember, the next stage of the MTD regime will affect those of you who are self-employed or are landlords with gross receipts (turnover) of £50K or more.
Like the MTD program, cloud software will be required to send e-invoices. In the background, many accounting packages such as Sage, QuickBooks, and Xero have also enhanced their capabilities in anticipation of a potential move toward e-invoicing.
Is it a positive development or simply bureaucratic red tape?
As experienced accountants, we have always emphasized the advantage of integrating cloud software like QuickBooks. It not only enhances efficiency and saves time, but also significantly streamlines collaborative work. Access to your up-to-date numbers further helps us do our job and help you when you need help.
We think that e-invoicing will enhance this experience even more. Adopting e-invoicing will further improve efficiency and contribute to positive cash flow for your business.
The Chancellor also believes that the introduction of “e-invoicing” will contribute to tackling the VAT gap. So far, e-invoicing has been successful in combatting VAT evasion in South America, and Italy has reported benefits of over four billion euros per year since introducing it in 2019.
The Chancellor hinted at a new “Digital Transformation Roadmap” for HMRC, which will be published in Spring 2025.
The Roadmap
The roadmap will outline HMRC’s vision to become a digital-first organisation, supported by customer insight. It will also include measures to ensure digital inclusion and provide support for customers who are not yet able to interact digitally. If you have any direct dealings with HMRC, you will know that we are a long way away from achieving this, but perhaps that is another reason for the transformation.
There is a shortage of people at HMRC, and everything seems to take ages to get sorted. The Chancellor has also announced that HMRC will recruit an additional 5,000 compliance officers, with 450 job offer letters already sent.
James Murray, the Exchequer Secretary to the Treasury, has been appointed as the chair of the HMRC board and will oversee the implementation of three strategic priorities for the Revenue:
- closing the tax gap
- modernising and reforming
- improving customer service.
There are rumours that the appointment signals the beginning of HMRC’s journey to becoming a government department.
Whether you agree or disagree with the Chancellor’s vision of transitioning businesses to “e-invoicing,” staying on top of your finances is crucial for running a successful business.
Let us help you. You can email your normal manager or if you are not yet working with us here’s how we work.
We will also keep abreast of the legal changes coming in. We don’t think that “e-invoicing” will be here before MTD, but let’s see what we learn in the next budget.