Traditionally, businesses have issued invoices to their customers in a variety of ways. These have varied between paper copies sent in envelopes via traditional post, PDFs attached to emails and some API systems. E-invoicing is the digitalisation of this process, whereby refined datasets that consist mainly of the information already held on a VAT invoice will be delivered electronically from one ERP system to another. In effect, invoices should automatically appear in your customer’s systems and theirs in yours.
The rationale given by the UK Government for e-invoicing is the administrative benefits that will be gained. If the issuance of invoices can be automated, the reasoning stands that time and costs will be saved compared to existing processes. That should help speed up payments, as invoices are received more promptly. There should also be benefits from having details of sales and purchases put into accounting systems automatically, thus saving time and, in theory, mitigating any transcribing costs (i.e. AP will no longer be at risk of keying the wrong details in or the OCR picking up the wrong details).
Implementation timetables
E-invoicing mandates already exist in many countries. Much of South America adopted it some time ago, Europe has a structured timetable related to its VAT in the Digital Age (ViDA) roll out, and it does already exist in the UK where invoices to the NHS are subject to e-invoicing.
The rol lout of e-invoicing mandates has been delayed in many EU countries due to technology constraints and businesses (and Governments) not being ready. The driver behind it, though, is the ViDA changes, which allow Member States to let businesses issue e-invoices without needing the permission of those receiving the invoices. This is linked, however, to the ViDA requirements to provide digital records when moving goods across borders. These need the data which e-invoicing demands, so e-invoicing needs to be in place before then. An approximate timetable of e-invoicing implementation across the EU is as follows:
- 2028
- 2029
- 2030 and beyond.
In the UK, further details will be revealed on 28 October 2026 when the Autumn Budget will be held but sometime in 2029 will be the go-live date. The UK Government is giving itself and businesses plenty of time to prepare and hence have the best chance to get its roll out right from the get-go.
Tax reporting interaction
E-invoicing is not a tax measure, and the implementation of it in much of Europe is a process being led by the Government’s business departments. Invoices with specified details have always been required by tax authorities but up to now, they have taken many different forms, have not always been digitised, and they have been held in different systems and formats. E-invoicing will change that and mean that all impacted businesses have digital sales and purchase records that should contain standardised data. This will mean that tax authorities can begin to review those records in a different and potentially more efficient way.
For example, tax authorities could:
- ask to verify tax invoices before they are issued to a customer (this happens in Italy already)
- be a central point in the e-invoicing chain and process sales and purchase invoices for businesses instead of them sending directly to each other
- ask for records to be uploaded to the tax authority in real (or near to) time (this happens in Spain and Hungary)
- get transactional reports provided on a regular basis (i.e. all sales and purchase listings provided when submitting the VAT return).
Tax authorities are taking these approaches because having better and more timely data should help them collect more tax. For example, in the UK we have Making Tax Digital (MTD) for VAT, but the reality of it is that VAT returns are submitted via an API link. That return still consists of, for most businesses, five pieces of summary details (VAT to pay and recover, the balance of those amounts, total VAT-exclusive sales and purchase values). HMRC only get access to detailed reports when they inspect a business, and hence it can be some time before they note that VAT hasn’t been charged correctly or recovered when it shouldn’t have. This means it can be some time before the right amount of VAT is identified and then even longer to process assessments and collect the right amount of VAT. If this information could be seen in real time, it should speed that process up, with the implied tax collection benefits.
Across the EU, a variety of the options listed above are being applied. In the UK, HMRC initially stated there would be no continuous transaction controls (CTC – the last option) until 2031 at the earliest, but recent comments look like this will change and be brought in earlier.
Who is impacted and how to prepare
Most of the EU and UK mandates for e-invoicing put obligations for issuance and associated new tax reporting rules on established businesses. This generally means those that are incorporated in those countries and/or have some form of substance (i.e. human and technical resources to make and receive supplies on a permanent basis). The rules are also generally restricted to B2B domestic supplies, where the recipient of the invoice is also within the same country. However, each country has rolled out its own take on e-invoicing, and hence it’s necessary to review the rules on a country-by-country basis.
In practice, this means that every business across the UK and EU which is making domestic B2B supplies should consider whether e-invoicing impacts it. For multi-nationals operating across various territories, the added complication is to consider how each of its entities is impacted and how can a uniform approach be coordinated and applied (i.e. can every office use the same e-invoicing system or process). All businesses will also have to consider how VAT returns are completed because although there should be many AP and AR invoices created via e-invoicing, where supplies are not caught by those rules (i.e. B2C supplies, cross-border, etc.) they will need to consider how to amalgamate all those separate datasets.
E-invoicing is going to create a need for new processes, software and reporting set-ups in many businesses. This is going to be necessary though, not just to comply with the rules but also to help manage increasingly nosey tax authorities. Those organisations that take the opportunity to proactively set up for the change will, though, benefit the most, as they enjoy the time and cost savings of better administration and utilise the better data that can be generated.
Once you understand what e-invoicing is, read our guide to preparing for e-invoicing
For further information on the above, please get in touch with your usual Crowe UK contact.
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