HMRC needs to get e-invoicing right to boost business uptake

In its submission to a government consultation¹, the Institute stresses that building confidence in e-invoicing² depends on effective delivery, grounded in detailed consultation, co-creation, rigorous testing and thorough post-implementation evaluation.

The CIOT has recommended that any e-invoicing software should be built to flexible, agreed minimum standards³ that accommodate variations in invoicing requirements in tax legislation, while ensuring clear expectations around operability, security, and data accessibility for taxpayers.

Ellen Milner, CIOT Director of Public Policy, commented:

“If the UK government desires greater adoption of e-invoicing without mandating its use, HMRC will need to consider a package of options to encourage voluntary adoption. This may include an educational and training campaign, financial incentives, providing a better business experience, effective implementation and systems that instil confidence to move along the digital journey. 

“Several recent digital projects have suffered issues with functionality⁴, agent access and poor implementation, risks that could undermine trust and discourage voluntary participation in future initiatives. If the government decides to move towards any form of reporting through HMRC, such a project should be aligned with other reporting schemes, or at the very least reflect HMRC’s ‘digital first’ strategy⁵ going forward.”

UK and non-established businesses are currently able to use e-invoicing on a voluntary basis, with HMRC not taking any active role in promoting or setting any e-invoicing specific standards. Take-up of e-invoicing by UK businesses for domestic use is currently limited.

Ellen Milner continued:

“In today’s digital landscape, the UK risks falling behind in digital competitiveness if it does not deliver e-invoicing effectively. We support e-invoicing—especially efforts to encourage greater voluntary adoption—and favour a decentralised model.

“There would be some significant challenges with introducing mandatory e-invoicing. If the government do decide to go down this route, it should give serious consideration to the use of thresholds and phased implementation to cascade such digital change over a sensible timeframe.  

“A realistic approach to policy objectives is crucial – delivering enhanced tax compliance and reducing the costs and administrative burdens for UK businesses.”

ENDS

Notes for editors

1. ‘Promoting electronic invoicing across UK businesses and the public sector’ consultation
2. E-invoicing is where the supplier’s invoice is electronically transferred from the supplier’s accounting system directly to the customer’s accounting software, which automatically books the invoice into the customer’s records. It is more advanced than, say, emailing a PDF file that the customer has to book into their accounts system themselves.
3. The CIOT has previously communicated to HMRC what they believe should be the minimum standards which should be applied by HMRC. 
4. For example, with Making Tax Digital for Income Tax, the CIOT raised concerns with HMRC around the content of the minimum functionality standards, following the late and unexpected decision that HMRC would not develop an end of year submission service.
5. HMRC IT Strategy: 2022 - 2025