Government sets out plans for ‘e-invoicing’ overhaul to cut paperwork

UK businesses are, for the first time, being invited to have their say on the government's electronic invoicing (e-invoicing) proposals.

E-invoicing is the digital exchange of invoice information directly between buyers and suppliers. It could help businesses get their tax right first time, reduce invoicing and data errors, improve the accuracy of VAT returns, help close the tax gap and save time and money. It usually results in faster business to business payments, leading to improved cash flow and less paperwork.

This will help cut down time and resources businesses spend managing their tax affairs so they can be more productive. It forms part of the Prime Minister's Plan for Change for a tax system that supports economic growth.

Examples of where e-invoicing has improved cash flow include:

• Australian Government agencies who are paying their suppliers within 5 days compared to 20 days for other forms of invoices.
• a UK NHS trust where e-invoices are ready for processing within 24 hours, compared to 10 days under paper invoicing. Their e-invoices are typically paid almost twice as quickly than paper invoices, with supplier queries reduced by an average of 15%.

Examples of the wider benefits to business of e-invoicing are highlighted by software providers:

• Xero see e-invoicing as the next digital revolution for small firms, simplifying how businesses invoice customers and get paid faster. Firms will save money on chasing payments, improve cash flow and reduce fraud risks.
• a published business research report from Sage* shows that e-invoicing streamlines routine tasks like data entry and tax filing, driving annual productivity gains of around 3% in the UK, supporting the government's broader growth agenda.

The 12-week consultation ‘Promoting electronic invoicing across UK businesses and the public sector' was published today (13 February 2025) by HM Revenue and Customs (HMRC) and the Department for Business and Trade (DBT). The deadline for comment is 7 May 2025.

James Murray, Exchequer Secretary to the Treasury said:

As part of the Prime Minister's Plan for Change, we have begun our work to transform the UK's tax system into one that is focused on helping businesses and the economy to grow.

E-invoicing simplifies processes, reduces errors and helps businesses to get paid faster. By cutting paperwork and freeing up valuable time and money, it will help improve firms' productivity and their ability to grow and succeed.

Gareth Thomas, Minister for Services, Small Business and Exports, said:

Small businesses are at the heart of our economy and vital to our growth mission. The potential of digitising taxes, speeding up payments and streamlining administrative tasks will provide real benefits to the economy, supporting smaller firms and boosting growth.

This is why we want to make sure e-invoicing works for SMEs, because cash flow can make all the difference between staying afloat or going under.

The consultation applies to business invoicing. It will gather views on standardising e-invoicing and how to increase its adoption across UK businesses and the public sector. It also explores how different e-invoicing models could align a business with their customers' businesses. People can take part whether or not they currently use e-invoicing.

HMRC and the DBT want to hear the opinions of self-employed people, businesses of all sizes, representative and industry bodies, charities and public sector organisations.

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, and 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.

The government will also engage with a broad range of businesses and interested stakeholders to secure their views at various events, including face-to-face discussions.

Exchequer Secretary to the Treasury, James Murray, will host a business round table at the Darlington Economic Campus and Government Hub this afternoon (13 February 2025), where he and Business and Trade Minister, Gareth Thomas, will discuss the consultation and listen to the opinions of industry bodies, regional stakeholders and local businesses in the North East.

It follows a visit earlier in the day by James Murray MP to software developer Sage's Newcastle headquarters, where he met with accountants to discuss government support for small businesses and how HMRC is working to deliver its priorities. Sage is one of the providers of software for HMRC's Making Tax Digital (MTD) programme. A full list of software providers for MTD can be found on GOV.UK.

Further Information

The consultation ‘Promoting electronic invoicing across UK businesses and the public sector' is available on GOV.UK.

A Welsh language version is available on request.

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

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

‘Failure to take reasonable care' and ‘error' accounted for 22% of the VAT tax gap in the 2022 to 2023 tax year. Industry research** shows that 80% of businesses globally manually enter their supplier invoice data into their accounting system, typically around 10% of entered data has some form of error. Adopting e-invoicing can automate this data entry and reduce opportunities for error.

HMRC and the DBT want to understand how differing approaches may integrate with current 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 responses will be used to inform future decision-making.

Enquiries about the consultation and responses to it should be sent to: einvoicingconsultation@hmrc.gov.uk or by clicking a link in the consultation document.

People interested in joining business round tables and other events to contribute to future e-invoicing policy development can contact: einvoicingengagement@hmrc.gov.uk

A future e-invoicing consultation was announced by the Chancellor of the Exchequer, Rachel Reeves, on 23 September 2024 in a package of reforms to improve the UK's tax system.

This was confirmed for ‘early 2025' in the Autumn Budget on 30 October 2024.

The published studies as referenced are: *'E-invoicing: Paving the way to a Connected, Real-time Economy' (Sage)/ **'Billentis – The Global E-invoicing and Tax Compliance Report'