The UK government is focusing on electronic invoicing, known as e-invoicing, as one potential solution to reducing businesses’ administrative burden. It recently launched a 12-week e-invoicing consultation and actively encourages UK businesses to participate.
E-invoicing is a system of digitally exchanging invoices between buyers’ and suppliers’ financial systems. If e-invoicing became mainstream or compulsory, it would eliminate the need to manually enter data into both systems, resulting in reduced administrative labour and increased business productivity.
It would also ensure that invoices are accurately and promptly recorded directly in the recipient’s financial system, removing the likelihood of human errors and streamlining tax processes.
Key Takeaways
What is the government’s proposal on e-invoicing?
On 13 February 2025, HM Revenue & Customs (HMRC) and the Department for Business and Trade (DBT) jointly published ‘Promoting electronic invoicing across UK businesses and the public sector.’ This consultation seeks to explore various aspects of e-invoicing, including:
- Which e-invoicing frameworks and technologies will be the most effective for UK businesses
- Whether e-invoicing should be compulsory for all businesses or introduced voluntarily
- Which sectors or sizes of businesses should be included in any potential mandate
- The benefits of integrating e-invoicing with real-time tax reporting systems to enhance compliance and efficiency
The consultation is open until 7th May 2025, and the government encourages businesses of all sizes, industry bodies, and public sector organisations to participate.
This consultation will not result in immediate changes. However, it is an opportunity for businesses to influence policy decisions about the future of e-invoicing.
Potential benefits of e-invoicing
Adopting e-invoicing can offer numerous advantages for businesses:
Cost savings
By removing the administrative burden of manually inputting invoice information, businesses stand to save a significant amount of time from e-invoicing. This results in cost savings and increased productivity. The government estimates that moving to e-invoicing reduces invoicing costs by 60-80%.
A Sage report indicates that small European companies could save approximately €13,500 (around £11,000) annually by implementing e-invoicing. These savings stem from reduced time spent on processing invoices and correcting errors.
Improved cash flow
E-invoicing also has the potential to speed up payment cycles. For instance, an NHS trust reports that e-invoices were ready for processing within 24 hours, compared to 10 days for paper invoices. This efficiency made payments almost twice as quick, with a 15% reduction in supplier queries.
Enhanced accuracy
Automating the invoicing process reduces the likelihood of human errors, ensuring that VAT (Value Added Tax) returns and other financial reports are more accurate.
Do other countries use e-invoicing?
The UK’s move towards e-invoicing is part of a global shift towards digital invoicing to improve efficiency in business transactions. Approximately 130 countries have implemented or are in the process of implementing e-invoicing standards.
For example, in Italy, e-invoicing is mandatory for all business transactions, and in Sweden, public sector entities are required to accept e-invoices.
What is PEPPOL?
PEPPOL (Pan-European Public Procurement On-Line) is an existing secure and standardised infrastructure for e-invoicing and other procurement documents. Originally developed in Europe, PEPPOL is now used in several countries worldwide, including Australia, Singapore, and New Zealand.
If the UK aligns with PEPPOL, it could simplify international trade, making cross-border transactions more efficient and secure for businesses.
E-invoicing challenges and considerations for businesses
While the benefits are clear, transitioning to e-invoicing comes with certain challenges businesses must be aware of and prepare for.
Initial setup costs
Businesses may need to invest in new software or upgrade existing systems to handle e-invoicing. This is especially relevant for businesses currently using paper-based systems.
Training requirements
Staff will need training to use new systems effectively. Moving to a digital automated system may initially prove challenging for businesses without in-house financial professionals.
International issues
Without a standardised format, businesses might face issues when handling international transactions. Until governments agree on a universally accepted system, businesses may have to rely on traditional invoicing methods when dealing with suppliers or buyers overseas.
Data security
With the digital nature of e-invoicing, protecting sensitive financial data is a crucial concern for businesses. Businesses will need to implement strict access controls so that only authorised personnel can view or modify financial data. This will ensure businesses adhere to GDPR, safeguarding customer and business information.
How to participate in the consultation
Businesses are encouraged to share their views by completing the online form ‘Promoting electronic invoicing across UK businesses and the public sector’ on the government’s official website. Responses can also be emailed to [email protected].
By participating in the consultation, UK businesses have an opportunity to shape the future of digital invoicing so that any implemented system aligns with their needs.
How UK businesses can prepare for e-invoicing
Though e-invoicing is not yet mandatory in the UK, businesses can be proactive by preparing now. Here are some steps to get started:
- Assess current invoicing systems and identify inefficiencies
- Research accounting software that supports e-invoicing, such as Xero, QuickBooks, or Sage
- Engage with the government consultation to share your views on how e-invoicing should be implemented in the UK
- Ensure your team is aware of the potential transition to digital invoicing
- Stay informed about any regulatory changes related to e-invoicing. Whatever happens, Quality Company Formations is here to report what you need to know.
The future of invoicing in the UK
E-invoicing is a crucial step toward modernising the UK’s financial systems. Adopted widely, it could transform how businesses handle transactions, making processes faster, more efficient, and more cost-effective.
This move towards e-invoicing is part of the UK’s broader strategy to digitise tax and administrative processes and create a more efficient and competitive business environment.
While we wait for the consultation’s results and the policy changes it influences, business leaders should take advantage of this shift by preparing for digital transformation and engaging with the government’s consultation to shape the future of invoicing.
We hope you have enjoyed this blog. For information on the accounting and tax aspects of running a UK business, browse our other Quality Company Formations articles. Please comment below if you have any questions on e-invoicing, and we will be happy to respond.
Please note that the information provided in this article is for general informational purposes only and does not constitute legal, tax, or professional advice. While our aim is that the content is accurate and up to date, it should not be relied upon as a substitute for tailored advice from qualified professionals. We strongly recommend that you seek independent legal and tax advice specific to your circumstances before acting on any information contained in this article. We accept no responsibility or liability for any loss or damage that may result from your reliance on the information provided in this article. Use of the information contained in this article is entirely at your own risk.
Thanks for the article! It was helpful learning about e-invoicing for my own personal tax advisory UK business.
Dear David,
We truly appreciate your input! It’s always great to hear from our readers, and we’re pleased that you found the article helpful.
Let us know if there’s anything else you’d like to see covered in the future.
Kind regards,
The QCF Team.