What is e-invoicing?

Electronic invoicing, or “e-invoicing” , is the exchange of invoice documents between a supplier and a customer in a structured digital format. Unlike traditional paper invoices or PDF documents sent by email, e-invoices are generated, transmitted and received in a standardised electronic format that allows for automated processing.

How does e-invoicing work?

The e-invoicing process typically begins with the supplier creating an invoice using specialised software. The e-invoice is then transmitted electronically to the customer's system, which automatically receives and processes it. The invoice data is integrated into the customer's accounting system without intervention, eliminating the need for manual data entry and paper handling.

Benefits of e-invoicing

The main benefit of e-invoicing is that it significantly increases efficiency and reduces processing times. The automated nature of e-invoicing reduces errors in invoice processing, potentially leading to faster payments and improved cash flow.

Challenges of e-invoicing

Businesses may face some challenges in its implementation. The initial costs of setting up e-invoicing systems can be significant, and employees may require training on new processes. Ensuring compliance with relevant standards and regulations is crucial, as is the successful integration of e-invoicing with existing accounting systems.

Current UK position

Currently, the use of e-invoicing in the UK is voluntary for most businesses, although some larger corporations and those engaged in international trade have already adopted e-invoicing systems.

It's important to note that e-invoicing is mandatory for transactions with public bodies in the UK. The government’s rules stipulate that e-invoicing systems must be used for any payments to and from public entities (such as the NHS, government departments or local councils).

International approach

E-invoicing is gaining global traction, with more than 80 countries already having e-invoicing mandates. Latin American countries such as Brazil and Mexico have been at the forefront of this trend, often using e-invoicing as a tool to modernise their tax systems.

The EU's VAT in the Digital Age (ViDA) proposals include an EU-wide mandate for real-time digital reporting for cross-border trade based on the standardisation of e-invoicing. If the ViDA proposals are agreed, the e-invoicing and digital reporting rules are currently due to be effective from 1 July 2030.

Next steps

In September 2024, the government announced that it will launch a consultation to “gather input from businesses on how HMRC can support investment in and encourage e-invoicing uptake".   

The government says that “the introduction of e-invoicing can significantly reduce administrative tasks, improve cash flow, boost productivity, introduce automation, and reduce errors in tax returns – all helping to close the tax gap.”