Electronic invoicing: promoting e-invoicing across UK businesses and the public sector

This initial stage consultation into the next steps for electronic invoicing (e-invoicing) within the UK focuses on standardising e-invoicing and how to increase adoption of e-invoicing across UK businesses and the public sector.

LITRG submitted a brief letter in response to the consultation, recognising that many businesses could benefit from e-invoicing, however for some smaller businesses these benefits could be diminished by the cost of software and how easy it is to use. Our response focused on sole traders or one person director/shareholder limited companies, who are unable to afford professional advice.

We understand that to achieve the full benefits which the consultation document says e-invoicing can offer, mandatory standardised e-invoicing would be the preferable approach. However, we have concerns that some small and micro businesses may struggle to comply with mandatory e-invoicing due to factors including the cost of software (unless free software is made available) and in some cases limited digital and IT skills. There is also likely to be a time cost in learning new software.

If mandatory e-invoicing is the appropriate path to take, then we consider it to be very important to have appropriate exemptions available for those unable to use e-invoicing, as well as an entry threshold in place. If an existing entry threshold were to be used, then we consider the VAT registration threshold to be the most appropriate as a starting point. This is a reasonably well-known threshold among larger businesses and there is at least a general awareness of the VAT threshold among small and micro businesses.

We would encourage HMRC to carry out research to get a better understanding of how the very smallest businesses, especially those who may not work through traditional business models, will deal with mandatory e-invoicing. In our experience HMRC often underestimates the costs (both time and hardware/software expenses) of implementing these changes and overestimates the IT and accountancy skills of many unrepresented small businesses.