Public e-invoicing consultation for U.K.

U.K. Chancellor Rachel Reeves has announced the launch of a public e-invoicing consultation to promote the wider use of e-invoicing and real-time reporting across Britain. 

The chancellor made the announcement at the Labour party conference in September as part of Labour’s package of measures to deliver on the agenda of the new government. Though its start date and duration are currently uncertain, the consultation will gather feedback from U.K. businesses to better understand how His Majesty’s Revenue and Customs (HMRC) can support e-invoicing adoption. E-invoicing is not currently mandatory in the U.K. for B2B supplies, though it can be used by businesses on a voluntary basis.

The chancellor also announced that James Murray, the minister responsible for the U.K. tax system, will oversee the implementation of strategic priorities for HMRC, including closing the U.K. tax gap — which currently stands at an estimated £8.1 billion — and modernising and reforming the U.K. VAT system. To this end, a Digital Transformation Roadmap was also announced, which will set out in Spring 2025 HMRC’s vision to become a ‘digital-first’ organisation. 

Moving to e-invoicing is a proven way to reduce time-consuming, manual administrative tasks to become a digital-first organisation. E-invoicing can also improve cash flow, boost productivity and efficiency, and help close tax gaps. For example, Italy has already managed to reduce its VAT gap by almost 11% with the help of e-invoicing. Similarly, Poland’s gap has closed by almost 8%. Given the chancellor’s numerous statements about closing gaps in U.K. public finances, it’s unsurprising that e-invoicing is on the agenda. 

Proven success and benefits to businesses and governments alike mean the uptake of e-invoicing and real-time reporting — including mandated use — in more and more countries and markets is a matter of when, not if. Despite a number of delays and amendments to mandates in all global regions, the rollout of e-invoicing continues around the world at a steady pace. Businesses will need to adapt in the near future if they haven’t done so already.  

We can only speculate as to the results of the U.K. consultation, and more may be announced by the chancellor during the budget on October 30. However, looking at the outcomes of similar consultations conducted elsewhere can give us some insight into businesses’ thoughts on moving to e-invoicing and real-time reporting.  

In October 2023, the Irish Minister for Finance Michael McGrath announced a public consultation on Ireland’s VAT invoicing and reporting systems. The consultation took place from October 13, 2023, until January 31, 2024. It invited businesses to give their views and opinions on making digital advancements to reporting requirements and invoicing, and culminated in the publication of a report in June 2024.  

All public bodies in Ireland have been required to accept e-invoices from suppliers (if suppliers choose to issue them) since 2019. The Irish government hopes that wider e-invoicing adoption — as well as a move to real-time reporting — can simplify Ireland’s tax system and close its own VAT gap, estimated at €1.7 billion. 

More than 1,000 businesses voiced their opinions throughout the duration of the consultation. 39% of respondents operated in the provision of services, including software. Other respondents comprised a broad mix of businesses from all sectors, from property, retail, and hospitality to education and the arts. 46% of respondent businesses had an annual turnover below €100,000, 28% were in the range of €100,001 up to €700,000, and 6% had a turnover exceeding €12m. 

Only 5% of respondents suggested they considered the present system of VAT reporting will be suitable in the future, with 45% being supportive of modernisation. Concerns remained around the ability to adapt to new systems and associated costs, particularly for smaller businesses. Ease of use in the design of any new systems was therefore a priority for businesses. 

Businesses would also like to see penalties for noncompliance suspended for an initial period following implementation, to give businesses time to resolve teething issues.

About one-third of businesses said they’d have concerns about moving to real-time reporting, as they may not be able to ‘get things right’. There were concerns over an increase to administrative work (though some stated they’d be happy if real-time reporting reduces administration time) and financial issues if they could not report as required. Businesses raised concerns regarding their IT system capability, IT literacy, and software availability. 

While backing modernisation, businesses had concerns that normal business activities should not be adversely impacted. Some cautioned against moving too swiftly, and stressed that benefits of real-time reporting should be balanced against the possible additional compliance costs and disruption. 

Most businesses said they had little knowledge of e-invoicing, with some even seeing it as irrelevant to their current operations. As with real-time reporting proposals, several businesses had concerns about the capability of their IT systems and their own IT literacy when it comes to transitioning to e-invoicing. They also had concerns about the availability of software solutions, and potential increases in administrative burdens and associated costs, particularly for small and micro businesses.

Businesses also recommended that e-invoicing requirements should not adversely impact a business’s core invoicing function, and that mandatory e-invoicing should not create unwanted issues or burdens. 

Businesses would like to see governments engaging with e-invoicing software providers to ensure that solutions are tailored to the needs of SMEs, and are easy to understand and use.  Engagement with providers would also help ensure updates can be developed and rolled out as quickly and as easily as possible. 

Concrete e-invoicing and real-time reporting proposals are yet to take shape in Ireland. Following the publication of the report, the Irish government is “studying all the recommendations and paying attention to the concerns that both businesses and stakeholders have articulated.” The Irish government is continuing to engage businesses in further discussions. But what can we expect to discover from the U.K. consultation?  

From the above findings, we can conclude that businesses overall appear enthused by — or are at least willing to adapt to — e-invoicing and live reporting, provided their operations are not adversely affected and they’re not left with unreasonable compliance costs or additional administrative burdens. Businesses want e-invoicing and real-time reporting systems and solutions to be easy to implement, and preferably compatible with existing IT and finance systems. 

Avalara E-Invoicing and Live Reporting (ELR) can help businesses of all types and sizes adapt to the changing compliance landscape. By integrating with the systems businesses already use, Avalara ELR provides an intuitive e-invoicing solution that users who aren’t tax or tech experts can use to move away from time-consuming and error-prone manual tasks. The cloud-based software updates as more and more mandates and requirements are rolled out and finalised, meaning businesses can scale without disruption and focus on their goals. 

Speak with us today about implementing your e-invoicing solution.