UK Tax Reforms: Introduction of E-invoicing & HMRC Digital Transformation

The United Kingdom (UK)  government plans to conduct a digital transformation, which includes the so-called HMRC package. The package aims to significantly upgrade the UK tax system, making it more efficient and transparent. 

In her public announcement, the Chancellor provided a brief overview of the central policies and steps the new government plans to undertake and how it wants to upgrade HMRC to tackle challenges in the digital age. 

UK’s HMRC Package and Further Steps

The HMRC package should reduce administrative burdens, improve cash flow, enhance productivity, and introduce automation for government and businesses. These measures should further reduce the space for VAT return error, evasion, and fraud. Consequently, this should lead to increased VAT collection, the government budget, and a reduced VAT gap.

As announced by the Chancellor, tax reform includes introducing the UK-wide use of e-invoices by businesses and government bodies. The first step in that process is the public consultation launched and conducted by His Majesty's Revenue and Customs (HMRC).

The purpose of the consultation is to gather as much information as possible from the public, businesses, and other interested parties on the implementation approach and support needed by the government to stakeholders to finish this process successfully.

The exact date of the start of the consultation still needs to be determined. However, rest assured that the Chancellor and the government are working diligently to ensure that the new Digital Transformation Roadmap (Roadmap) should be published in the spring of 2025. With this reform, the UK governments want to complete the HMRC digitalization and transform this government body into a fully digitalized one. 

Therefore, consultation regarding the introduction of e-invoicing should be completed before this Roadmap is presented to the public.

Conclusion

The UK government is preparing for a significant reform of its tax system, which will undoubtedly affect businesses operating in the UK. Therefore, companies should closely examine this reform, such as when the e-invoicing rules will be implemented and to which transaction.

Information on whether the e-invoicing rule will be implemented on B2G, B2B, or B2C transactions is unavailable, leaving companies uncertain about preparing for this transition. For that reason, once the consultation is open to the public, all stakeholders should provide their input and monitor the situation's further development.

Source: HM Treasury