Electronic invoicing: promoting e-invoicing across UK businesses and the public sector

Question 1

Summary

Accepted Answer

Subject of this consultation

The purpose of this consultation is to gather views on standardising electronic invoicing (e-invoicing) and how to increase adoption of e-invoicing across UK businesses and the public sector.

Scope of this consultation

The consultation will explore how different e-invoicing approaches may align with you or your customers’ businesses. The information you provide will support the development of a UK approach.

Who should read this

The government is interested in responses from businesses of all sizes, whether or not you use e-invoicing, interest groups, representative bodies, industry bodies and individuals.

Duration

The consultation will run for 12 weeks from 13 February 2025 to 7 May 2025.

Lead official

The lead officials are Lily Duane and Rachel Stirrat of HM Revenue and Customs (HMRC).

How to respond or enquire about this consultation

You can respond to this consultation by submitting this form or by sending responses to einvoicingconsultation@hmrc.gov.uk by 7 May 2025.

Additional ways to be involved

The government will engage with businesses in different ways to ensure we gain views and input from a broad range of interested stakeholders. This will include business round tables and other events through which stakeholders can contribute to future policy development. If you would like to be involved in these events, please email einvoicingengagement@hmrc.gov.uk.

Question 2

Foreword

Accepted Answer

New digital technologies like e-invoicing will simplify business processes, freeing up valuable time and money. More efficient invoicing will help businesses to get paid faster and should significantly simplify a business’s tax reporting requirements and reduce errors in tax returns.

Greater automation has the potential to significantly improve business productivity, cash flow, and to reduce administrative burdens. Widespread adoption of e-invoicing in the UK should benefit both businesses and tax administration, improving our prosperity and helping increase economic growth. The transition towards e-invoicing in the UK will involve changes to existing business practices. We are keen to understand the full implications of this for business across the UK.

We are pleased that HMRC and the Department for Business and Trade (DBT) are collaborating to develop an approach that supports both the economy and tax system.

Finally, we welcome and look forward to hearing the views of businesses of all sizes, civil society, and other partners. Your engagement will support our work to determine the right approach for the UK.

James Murray
Exchequer Secretary to the Treasury

Gareth Thomas
Minister for Services, Small Business and Exports

Question 3

1.  Executive summary

Accepted Answer

The purpose of this consultation is to gather views on standardising electronic invoicing (e-invoicing), and how to increase adoption of e-invoicing across UK businesses and government departments.

E-invoicing is the digital exchange of invoice information directly between buyers’ and suppliers’ financial systems, even if these systems are different. The outcome is an invoice which is automatically written into the buyer’s financial system without manual processing.

E-invoicing automates the exchange of invoices between buyers and suppliers. Increased e-invoicing uptake may support economic growth, business productivity, improve business cashflow and reduce errors in tax returns. Increased uptake of e-invoicing could support businesses by reducing administration burdens, improving cash flow, reducing error, and lowering costs. Using the improved data to support tax reporting and compliance could also simplify tax administration and reduce errors in invoices and tax returns.

HMRC and DBT want to understand how differing approaches may integrate with your business systems. This will support development of a UK approach to e-invoicing that improves business productivity by reducing admin burdens and helping businesses to get their tax right. There will be no immediate change in response to this consultation and your responses will be used to inform future decision-making.

The purpose of the consultation is to seek input on how the government can support the increased adoption of e-invoicing. Topics that the government is interested in exploring include:

different models of e-invoicing
whether to take a mandated or voluntary approach to e-invoicing
what scope of mandate might be most appropriate in the UK and for businesses
whether e-invoicing should be complemented by real time digital reporting

Question 4

2.  Introduction

Accepted Answer

What is e-invoicing?

E-invoicing is the digital exchange of invoice information directly between buyers’ and suppliers’ financial systems, even if these systems are different. The outcome is an invoice which is automatically written into the buyer’s financial system without manual processing.

E-invoicing technology has been in use for over 20 years and an increasing number of countries require businesses to use e-invoices for at least some transactions. There is global recognition for the role of standards in enabling e-invoicing, particularly in international trade, and around 130 countries have or are in the process of implementing e-invoicing structures and standards (including data they should include and their format).

E-invoicing in the UK

While e-invoices can be used in the UK, we do not set any standards setting out their format, content, application, or delivery. This means that there is no generally accepted model, and multiple, potentially incompatible, approaches can be in use. The exception to this is suppliers to NHS England who are required to issue e-invoices via the Pan-European Public Procurement On-Line (PEPPOL) network.

Although several accountancy software providers offer e-invoicing capability in the UK, we understand that the uptake of e-invoicing is low. There is some evidence that increased uptake of e-invoicing can provide both business facilitation and tax reporting benefits. E-invoicing may:

improve productivity by reducing admin burdens and costs
improve business cashflow by supporting faster payments and better data
simplify tax reporting and reduce the tax gap through reducing error and helping businesses to manage their tax affairs

Therefore, we are exploring options for different models of e-invoicing in the UK and for different levels of government involvement in driving uptake.

Question 5

3.  Subject chapters

Accepted Answer

 About you

Question 1: Are you responding to this survey as:

a business
a representative body
an organisation
an individual
other (please provide details)

Question 2: Are you UK or internationally based? Please provide details.

Question 3: Are the views offered in your responses:

your own views
your organisation’s views
your members’ views

If you are responding to this survey as a business

Question 4: Where does your business operate? (please select all that apply)

England
Scotland
Wales
Northern Ireland
Isle of Man
EU – please state which country
Non-EU – please state which country

Question 5: What is your industry sector (such as accounting, finance, software, retail, construction, other)?

Question 6: To help us determine business size, please provide details on:

number of employees in your business
annual turnover
a rough summary of how your sales are split (Business-to-Customer, Business-to-Business, Business-to-Government)

Question 7: How long has your business been operating?

Question 8: Do you use an accountant for your business?

Other

Question 9: Please provide any further information about your organisation or business activities that you think might help us put your answers in context.

Your knowledge of e-invoicing

Question 10: What is your interest in e-invoicing? Are you a:

potential or current user of e-invoicing
an e-invoicing service provider
a tax/accountancy provider
other (please provide details)

Question 11: Prior to this consultation, were you:

aware of e-invoicing and a current user
aware of e-invoicing and a previous user who has since ceased using e-invoicing
aware of e-invoicing, but chose not to adopt
unaware of e-invoicing

Question 12: If your business currently uses e-invoicing, when did you implement it?

Question 13: If you are a current, or former user of e-invoicing, could you comment on any benefits or drawbacks you have experienced?

Question 14: If you were previously aware of e-invoicing but have chosen not to adopt, could you explain why?

Tax reporting

Question 15: How many invoices (whether paper, PDF, e-invoice or other) do you send and receive each month?

Question 16: What is your average processing time and cost per invoice?

Question 17: Bridging software allows businesses to connect non-compatible software (like spreadsheets) to HMRC’s Making Tax Digital system. Do you currently use bridging software?

Policy objectives

We expect e-invoicing to provide several benefits for businesses, government, and the wider economy. HMRC and DBT will employ open policy-making and strong engagement to ensure that any future e-invoicing model supports businesses to grow and simplifies their tax administration. The following are the principles and benefits we intend to explore within that process.

Increased adoption

Barriers to adoption: support the adoption of e-invoicing across the economy through cost reduction and ensuring systems are simple to implement and use.

Business facilitation

Reduced cost and admin reduction: E-invoicing streamlines invoicing processes by reducing the need for manual processing. Industry estimates suggest that moving to e-invoicing reduces invoicing costs by 60-80%.

Greater visibility and processing times: Where paper or email invoices are particularly prone to processing errors and misplacement, e-invoicing can help provide real-time visibility into the invoicing and payment process, allowing businesses to track invoices from creation to payment.

Improved business cash flow: Evidence has shown that e-invoicing could support businesses through improved cashflow. DBT research found that late payments acted as a constraint on all businesses, but particularly small and midsized businesses. By reducing the time taken for invoices to be paid through e-invoicing, this constraint could be reduced.

Error reduction: Adoption of e-invoicing may also help to streamline business’s interactions with HMRC by reducing error and helping them get their tax right. Manually entering supplier invoice data has an average error rate of approximately 10%. E-invoicing would remove the manual processes and corresponding errors in invoicing, allowing direct data capture.

Fraud and data security

Identity and VAT invoice fraud: All organisations are susceptible to fraud. E-invoicing benefits business by providing a secure, digital data exchange which reduces the risk of invoices being intercepted and tampered with. Additionally, e-invoice sender and receiver details are validated, audit logs kept, and strict protocols are followed to ensure invoices remain secure when sent across the network.

Tax simplification and compliance

Improved data quality: Through automation and improved data security, e-invoicing can ease the admin burden of tax reporting and reduce the chance of error. E-invoicing could further modernise HMRC processes enhancing the benefits seen under Making Tax Digital for VAT (accuracy, productivity and admin reduction) through automation and greater data integrity.

Automated tax reporting: E-invoicing could automate parts of tax reporting, streamlining the processes and reducing time and resources spent on inputting data into systems. These benefits could be further enhanced by the inclusion of a data feed.

Tailored interventions: A data feed could improve HMRC’s ability to accurately target compliance activity, potentially reducing the need for compliance checks on compliant businesses.

Environmental impact

Paper reduction: Digital processing of e-invoicing reduces the carbon footprint compared to paper alternatives.

Question 18: Do you think there are any other benefits and priorities on e-invoicing that government should focus on?

Standardisation

The UK does not currently mandate standards for e-invoicing, other than requirements set by NHS England for their suppliers. For e-invoicing to provide the benefits listed above, all systems need to interact with each other based on common standards, including systems run by different providers. Standardisation will mean suppliers and buyers can exchange e-invoices domestically.

Why are standards important?

Interoperability: They facilitate the seamless exchange and automated processing of e-invoices between businesses even if they use a different provider (like sending a text to someone on another phone network) preventing the need to use different systems for each supplier/buyer.

Network effect: Interoperable systems improve business administration efficiency helping to reduce cost and administrative burdens. E-invoice standardisation reduces the work businesses need to do to onboard and maintain suppliers and buyers on their systems. With higher uptake and improved interoperability these benefits are increased.

International trade: As increasing numbers of countries adopt e-invoicing models, increasing numbers of UK businesses will need to engage with international systems. Adopting a standard that supports interoperability with international trade partners could support trade and UK businesses.

Current standards in the UK

An example of standard setting in the UK is the NHS requirement for suppliers to use the PEPPOL standard. The PEPPOL standard is a network used globally by most EU member states, Australia, Japan and Singapore. E-invoices from suppliers in countries mandating PEPPOL and the UK’s NHS can be processed by IT systems with ease, as they share a common standard. This facilitates automated invoice processing, driving efficiencies across both international trade and domestic transactions.

Other international standards

PEPPOL is not the only international e-invoicing network setting standardised format. There are numerous international, and country specific standards driven by regional and national differences as well as industry specific needs. In this consultation we are not looking to identify a specific standard or standards to adopt in the UK but broader views on how standards could be used to support e-invoicing adoption and increase potential benefits.

Question 19: What data do you think is important for a standard to include, and do you have any preference over the structure of information?

Question 20: Are you familiar with any e-invoicing standards? If yes, what is your preference on what works well and why?

Question 21: Would the UK adopting a single shared standard encourage you to take up e-invoicing?

Models and approaches

Voluntary/mandated

Globally, many countries have taken different approaches to e-invoicing. This includes whether to introduce a mandate.

Examples of countries who currently have voluntary models of e-invoicing for Business-to-Business transactions include Singapore, New Zealand and Australia. Each of these countries has introduced standards for software providers to adhere to, to support interoperability between businesses who choose to adopt e-invoicing. Adoption levels have varied between jurisdictions, sectors and business size.

Conversely, countries across Latin America, Asia and Europe and several EU member states have introduced mandates for e-invoicing. Businesses falling within a mandate are required to issue and receive e-invoices for all relevant transactions.

In the UK, a business can choose whether to adopt e-invoicing systems into their business systems. Under this voluntary system we are seeing increasing number of software providers including e-invoicing as part of their accounting packages. This does carry risk as a business does not know if their supplier will provide e-invoices or their customers will accept them, creating the potential for having to run dual systems. This may reduce the potential benefit of investment. The network effect created by a mandate could maximise the potential benefits of e-invoicing.

What is included in mandates varies globally. Examples for Business-to-Business and Business-to-Government transactions could include (but are not limited to):

requiring that e-invoices are issued for all Business-to-Business supplies
requiring that e-invoices are issued for all Business-to-Government supplies
requiring all businesses over a certain size to be able to receive e-invoices
requiring all businesses over a certain size to both issue and receive e-invoices

Question 22: Do you have any suggestions on how the government could support increased adoption under a voluntary system.

Question 23: Do you have any observations, concerns, or recommendations on a move to mandatory e-invoicing for Business-to-Business or Business-to-Government domestic transactions?

Question 24: If the UK was to introduce a mandate, how long would you need to implement e-invoicing in your operations?

Question 25: What would present a significant barrier to you complying with a mandate?

E-invoicing models

When considering different models of e-invoicing, a key question is whether a model has centralised or decentralised platforms. With a centralised model, e-invoices are submitted to the tax authority before being issued to the buyer. With a decentralised model, there is no central ‘hub’ through which invoices are routed, with businesses submitting their invoices through their software providers direct to their customers.

Centralised models 

Centralised models have been implemented in several countries (such as Italy and Chile) and they require the government to build a centralised system and process all invoices. This model does not always improve business efficiency and is costly for tax authorities to implement, and we do not plan to explore this model in detail.

The image shows an example of how centralised models may work. There are variations in how this is actioned globally, including the addition of data share or clearance functionality:

Supplier creates e-invoice and submits to the Central Platform.
Central Platform receives the e-invoice and takes any required actions before issuing on to the Customer. This could include standardising, retrieving data or validating and clearing.
Customer receives and processes the e-invoice.
Payment issued to supplier.

Decentralised models

In a simple decentralised e-invoicing system, a supplier’s financial system generates an invoice for the buyer. This information is passed through the invoicing network which validates key information. This information is then passed to the buyer’s financial system where it is reconciled against the purchase details and is ready to be paid. This is also sometimes known as a 4-corner model and has been implemented in Belgium and Australia.

Businesses use software providers to issue and receive invoices. When Business A issues an invoice to Business B, they upload it onto their e-invoicing platform. Business B then receives it via their platform and it automatically enters their accounting software. Business B can then check the invoice and either query it or issue payment.

The image shows an example of how a decentralised ‘4-corner’ model may work. There are variations in how this is actioned globally:

E-invoice created by supplier
Supplier’s software provider issues e-invoice
Customer’s software provider receives and processes e-invoice
Customer issues payment to supplier

Decentralised models can be complementary to Making Tax Digital and further build on the business and tax benefits observed in the digitalisation of business records. They also provide greater flexibility to businesses to choose a platform and supplier that fits within their business needs.

Question 26: Given the information provided and your own knowledge, do you think it is correct for the government to focus on a decentralised model over a centralised model?

Question 27: How would a decentralised 4-corner model impact your business operations?

Real time reporting and Continuous Transaction Controls (CTC)

Both centralised and decentralised models offer the opportunity for real or near real-time reporting of transactional data to the tax authority and has been implemented in a number of countries (such as Hungary and South Korea). This data transfer could potentially be automated to support and simplify businesses tax reporting processes and improve tax compliance activity.

The image shows an example of how a decentralised data share model may work. There are variations in how this is actioned globally:

E-invoice created by supplier
Supplier’s software provider issues e-invoice
Customer’s software provider receives and processes e-invoice
Customer issues payment to supplier
E-invoice data is shared in real time, or close to real time with the tax authority. This can occur at the same time the e-invoice is issued, or shortly after.

The image shows an example of how a centralised data share model may work. There are variations in how this is actioned globally:

Supplier creates e-invoice and issues through the Central Platform
Central Platform reads the required data and issues the invoice to the Customer
Customer receives and processes the e-invoice
Payment issued to supplier

Real-time reporting requires businesses to submit transactional data to their tax authority in real or near real-time. CTC and Decentralised CTC and Exchange (DCTCE) models contrast to the current VAT system as they allow tax authorities to better estimate VAT income, detect discrepancies, identity fraud and support businesses to get their tax right.

By building in a data feed to HMRC, it could enable HMRC to take further steps to simplify tax reporting, reduce error and support businesses to get their tax right. This could include:

improving accuracy of the VAT return and facilitate nudges and prompts to reduce errors
more targeted compliance activity reducing the need for compliance engagement and visits to compliant businesses supporting HMRC efficiency

A data feed also provides potential wider benefits for government efficiency:

provides an improved understanding of the economy
possibility of using data for business support schemes (for example, in emergency situations similar data has been used to develop and implement business support)

The inclusion of a data feed can also be implemented later following the creation of a decentralised system without data sharing.

Question 28: What are your views on an e-invoicing system with real-time reporting for Business-to-Business and Business-to-Government transactions?

Question 29: Would any additional services support your businesses activity (such as nudges and prompts or potential future use to pre-populate VAT returns)?

Question 30: Thinking about all the models and approaches discussed, which best meets the policy objectives listed at the beginning of the document and any others you may have identified?

Support and engagement with business

Successful international examples of e-invoicing implementation have included collaborative policy development between government and business to ensure the right support is offered and realistic adoption timelines are introduced.

Business engagement

Should we progress towards introducing standardised e-invoicing in the UK, or any form of mandate, the government will continue to work with businesses and representative organisations across the economy to develop policy which delivers benefits for businesses. In particular, we would work with the software and accounting sectors to assess existing standards and develop a UK regime. This engagement would also enable us to develop an appropriate timeline for introducing new standards and any requirements around them.

Delivery roadmap

Should we progress towards an e-invoicing model, HMRC and DBT will use the views gathered from this consultation and wider engagement activity to inform appropriate implementation periods.

Question 31: If the government was to move towards one of the discussed options, what support would be needed and how would that change between the different approaches?

Next steps

This consultation will be open for twelve weeks, closing on 7 May 2025. HMRC and DBT will then process all responses and use them to inform future policy development. A summary of responses will be published in due course. As part of this analysis, we may wish to contact some respondents to discuss their submission.

Question 32: Are you content for us to contact you if we have any questions about your response?

To further develop policy in this area, the government is likely to run further engagement including on technical issues around e-invoicing, including (but not limited to) the design of specific software standards, business identification schemes and specific sectoral needs.

Question 33: Are there other technical issues which you think we should look at further?

Question 34: Is there anything else you would like us to be aware of relating to a potential future UK policy on e-invoicing?

Question 6

4.  Assessment of impacts

Accepted Answer

Summary of impacts

Year	2024 to 2025	2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2030
Exchequer impact (£m)

Any Exchequer impact will be estimated following consultation, final scope and design of the policy proposals and will be subject to scrutiny by the Office for Budget Responsibility.

Exchequer Impact Assessment

Economic impact	Publication of this consultation is not expected to have any significant macroeconomic impact Any economic impact of these proposals will be estimated following consultation, final scope and design, and will be subject to scrutiny by the Office for Budget Responsibility.
Impact on individuals, households and families	There are expected to be no impacts for individuals at present by publishing this consultation. Any future impacts of reforms, if taken forward by the government after consultation, will be fully examined and detailed.
Equalities impacts	It is not anticipated that there will be impacts on those in groups sharing protected characteristics at present by publishing this consultation. Any future impacts of reforms, if taken forward by the government after consultation, will be fully examined and detailed.
Impact on businesses and Civil Society Organisations	There are expected to be no impacts for businesses or civil society organisations at present by publishing this consultation. Any future impacts of reforms, if taken forward by the government after consultation, will be fully examined and detailed.
Impact on HMRC or other public sector delivery organisations	Publication of this consultation is not expected to have any operational and delivery impacts or costs at this stage. Any future funding requirements will be assessed following the consultation.
Other impacts	Other impacts have been considered, and none have been identified.

Question 7

5.  Summary of consultation questions

Accepted Answer