{"id":246892,"date":"2025-06-25T09:11:15","date_gmt":"2025-06-25T07:11:15","guid":{"rendered":"https:\/\/blog.adesso-bc.com\/e-invoicing-in-the-uk-between-the-status-quo-and-regulatory-change\/"},"modified":"2025-12-01T17:31:59","modified_gmt":"2025-12-01T16:31:59","slug":"e-invoicing-in-the-uk-between-the-status-quo-and-regulatory-change","status":"publish","type":"post","link":"https:\/\/blog.adesso-bc.com\/en\/e-invoicing-in-the-uk-between-the-status-quo-and-regulatory-change\/","title":{"rendered":"E-invoicing in the UK: between the status quo and regulatory change"},"content":{"rendered":"\n

E-invoicing is at the heart of current digitisation initiatives in finance and taxation. Many countries around the world are pushing ahead with the introduction of electronic invoices in order to speed up business processes and curb tax fraud. The United Kingdom is also working intensively on this issue: at the beginning of 2025, the British government launched a public consultation on the standardisation and promotion of e-invoicing. The aim is to gather insights from business and government to set the future course for electronic invoicing in the UK. This blog article provides a clear overview of e-invoicing and the current situation in the UK \u2013 from the basics and the legal framework to the implications for businesses. <\/p>\n\n

What is e-invoicing?<\/h2>\n\n

E-invoicing refers to the structured, machine-readable exchange of invoice data in XML format according to standards such as UBL and transmitted via networks such as Peppol. Unlike paper invoices or PDFs, the data is processed directly between systems. Advantages include lower error rates, faster payments, lower costs and better tax traceability. E-invoicing is also a core element of modern digital accounting systems and supports the automation of invoice verification and approval processes. <\/p>\n\n

Would you like to learn more about the advantages and integration with SAP Document and Reporting Compliance (SAP DRC)? Then read the blog article<\/a> by our colleagues Felix L\u00f6ffler and Daniel Giesbrecht about the legal requirements and digital implementation with SAP DRC. <\/p>\n\n

What makes the United Kingdom special?<\/h2>\n\n

The United Kingdom is pursuing its own path when it comes to e-invoicing, shaped by Brexit and national peculiarities. Since leaving the EU, the country is no longer bound by European regulations and can shape its digital strategy independently. Although the EU directive on e-invoicing in public procurement was transposed into national law in 2019 \u2013 meaning that public contracting authorities (B2G) must be able to receive e-invoices \u2013 there is still no general obligation to use electronic invoicing. Companies can use e-invoicing on a voluntary basis \u2013 there is no comprehensive mandate. <\/p>\n\n

The healthcare sector is an exception: e-invoicing is mandatory for suppliers to the NHS (National Health Service). This sectoral obligation differs from other countries, which mostly introduce cross-industry mandates. <\/p>\n\n

Unlike countries such as Italy and Mexico, the United Kingdom does not rely on a centralised invoicing platform. The British tax authority HMRC (Her Majesty’s Revenue and Customs) rejects a centralised approach due to its complexity and cost. Instead, the country pursues a decentralised and market-oriented approach \u2013 companies are free to choose which software they use, provided that technical standards are met. <\/p>\n\n

After Brexit, the UK is not obliged to implement future EU initiatives such as the VAT in the Digital Age (ViDA)<\/em> reform package. Nevertheless, trade associations are calling for alignment with international standards in order to avoid competitive disadvantages for British companies. There is concern that a lack of an e-invoicing mandate could hamper investment and jeopardise international connectivity. <\/p>\n\n

A significant precursor in the digitisation process is the Making Tax Digital (MTD)<\/em> programme introduced in 2019. It requires companies to submit their VAT returns digitally. Since 2022, this has applied to all VAT-registered companies. The experience gained in this process is considered an important basis for a possible expansion to e-invoicing. <\/p>\n\n

Legal and regulatory framework<\/h2>\n\n

In the United Kingdom, electronic invoicing is permitted for tax purposes provided that certain requirements are met, such as data security, completeness and storage. This is regulated in HMRC VAT Notice 700\/63<\/em>. There is currently no legal obligation to use e-invoicing. Only public contracting authorities must be technically capable of receiving electronic invoices. One exception is the NHS, where e-invoicing via Peppol is mandatory. <\/p>\n\n

Following Brexit, the country is pursuing its own independent regulation. A national consultation was conducted in 2025 to examine the mandatory introduction. This included questions on possible standards, implementation scenarios and the introduction of real-time reporting systems (CTC: Continuous Transaction Control). The tax authority HMRC sees this as a means of closing the tax gap and supports the process, but is relying on voluntary participation and cooperation with the business community. A legal obligation could be introduced at the earliest towards the end of the 2020s. <\/p>\n\n

Status Quo in United Kingdom<\/h2>\n\n

Use in the public sector<\/h4>\n\n

Although authorities have been technically capable of receiving electronic invoices since 2019, the potential is not yet being fully exploited. The NHS in particular is actively promoting electronic invoice processing with its Peppol requirement, which has prompted many suppliers to make the switch. Individual regions such as Scotland and Wales also have platforms in place, but many invoices are still submitted as PDFs or in paper form across the board \u2013 mainly because there is no obligation for suppliers to do so. <\/p>\n\n

Distribution in the private sector<\/h4>\n\n

E-invoicing is not yet widely used in the private sector. Although there are industry-specific solutions, such as EDI procedures in retail and the automotive industry, these are mostly proprietary and limited to large market participants. Small and medium-sized enterprises often continue to rely on traditional invoicing processes, as there is neither regulatory pressure nor uniform standards. <\/p>\n\n

Current initiatives and pilot projects<\/h4>\n\n

The national consultation in spring 2025 not only gathered opinions, but also sparked discussion about e-invoicing in companies. In addition, HMRC is planning a digitisation strategy that specifically includes smaller companies. At the same time, companies and software providers are testing various formats and use cases in pilot projects. Industry associations such as the ICAEW are advocating a gradual, voluntary introduction. The international connection to the Peppol network will also be maintained, facilitating cross-border cooperation. <\/p>\n\n

Technical and organisational hurdles<\/h4>\n\n

A key problem is the lack of standardisation. Companies are confronted with different formats (UBL, EDIFACT, PDF, etc.), which makes interoperability difficult. Without a uniform framework, uncertainties and integration costs arise. In addition, there are currently no minimum technical requirements at national level, which is particularly daunting for smaller businesses. <\/p>\n\n

Technical requirements and standards<\/h2>\n\n

While the previous sections outlined the political and regulatory framework, below we take a look at the specific technical requirements for e-invoicing and how SAP Document and Reporting Compliance (SAP DRC) supports British companies in its implementation.<\/p>\n\n

Clear guidelines already apply in the public sector, such as in the NHS, where e-invoicing is mandatory via the Peppol network.<\/p>\n\n

Technologically, Peppol is based on the UBL standard and the European standard EN 16931, which ensures a high level of compatibility with EU requirements. This results in a decisive advantage for SAP customers: the integration of SAP DRC in conjunction with certified Peppol access points enables legally compliant and future-proof processing of e-invoices in the United Kingdom. <\/p>\n\n

Although the UK, unlike Italy or France, has not yet introduced a centralised government e-invoicing platform, regulatory considerations are moving in precisely this direction. A public consultation completed in May 2025 addressed various platform models, including 4-corner and 5-corner architectures and real-time reporting to the HMRC tax authority. The results of this consultation will have a significant impact on further legislation. <\/p>\n\n

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Fig. 1: The 4-corner & 5-corner model <\/figcaption><\/figure>\n\n

Impact on businesses<\/h2>\n\n

Requirements for UK companies<\/h4>\n\n

Even without a legal obligation, it can be worthwhile for companies to switch to e-invoicing at an early stage. The use of digital invoicing procedures enables automated processes, cost reduction and efficient preparation for upcoming reporting obligations. Essential functions such as audit-proof archiving, proof of authenticity and the provision of a human-readable representation are all standard features of SAP DRC. <\/p>\n\n

Impact on international business partners<\/h4>\n\n

Peppol-compatible formats are essential for companies with cross-border business activities, especially with the EU. Many European countries already require electronic invoicing in the B2G sector. SAP DRC supports the necessary interoperability and helps to avoid compliance risks in international business relationships. <\/p>\n\n

Recommendations for the changeover<\/h4>\n\n