Getting taxpayer and stakeholder feedback is how tax policy should be developed by HMRC

Gabby Donald, Partner said:

The recent HMRC and the Department for Business and Trade (DBT) stage one consultation on electronic invoicing (e-invoicing) is how the Government should develop tax policy. HMRC promoted the consultation widely, inviting a broad range of businesses, sectors, and advisors to feed into the formation of the proposed policy.

This stands in clear contrast to other consultations where HMRC has frequently already decided on the policy it will pursue and often, its plan for implementation, leaving limited room for feedback and reducing the consultation process to little more than a box-ticking exercise.

E-invoicing is the digital exchange of invoices directly between the financial systems of buyers and sellers, even if those systems are different. The sellers’ invoice is automatically entered into the buyers’ financial system without any manual processing.

Although e-invoicing can be used in the UK and is required in certain sectors, such as the NHS, its use is not widespread, and no single set of technical standards exist governing e-invoicing across the UK economy. The recent consultation gave an opportunity to provide feedback on key points that will have a bearing on the development of this policy, including:

The format of any technical standards together with the potential models for e-invoicing (e.g. centralised or decentralised models).

Should adoption of e-invoicing be mandated, together with the scope of any mandate (e.g. based on size of business, whether customers are businesses or private individuals, UK established businesses and / or UK transactions only)?

How should the government approach any mandatory changes in terms of timeline, phased introduction, communications, and guidance?

Should e-invoicing be combined with e-reporting of invoice data to HMRC?

International implications – should any UK e-invoicing requirements be aligned with models introduced elsewhere, e.g. in the EU?

Are the anticipated benefits, e.g. improved efficiency, cash flow, error reduction, likely and expected to outweigh the costs?

Most organisations and taxpayers recognise that HMRC needs to move towards a ‘digital first’ tax system and greater adoption of e-invoicing can support this. However, depending on the approach followed this could represent a significant change for businesses in how they invoice their customers to collect payment, requiring both up-front investment and ongoing costs.

Hopefully HMRC continues its engagement on e-invoicing in the same vein with additional consultation at subsequent steps of the policy design process, and this open and engaged approach starts to be used in other areas of tax policy.

Would you like to know more?

If you would like to discuss any of the above, please speak to your usual Blick Rothenberg contact or Gabby using the form below.