Globally, mandatory electronic invoicing is becoming a popular measure for governments to adopt to tackle VAT fraud and close the VAT gap. It now appears that the UK government has electronic invoicing in its sights as a measure to reform the UK tax system. HMRC is to begin a consultation on electronic invoicing following the Chancellor's recent announcement.

Considering how other countries have implemented electronic invoicing, and many are in the process of doing so, there would be considerable challenges to overcome, not least the necessary technology to support electronic invoicing. However, in some cases, it means more than just raising and receiving digital invoices through compatible software - it can involve the tax authority approving invoices through a central platform, or having some degree of real-time visibility over invoices being issued. It can also involve real-time or near real-time electronic submissions of transactional data to HMRC, which in some jurisdictions has effectively replaced the VAT return.

The experience of countries such as Mexico and Italy, in implementing electronic invoicing, indicates challenges ahead if the UK is to follow suit now, but ultimately success in ensuring the VAT gap is closed through efficiency and accuracy of VAT reporting.

We now await the opening of the consultation, and the questions HMRC eventually include will perhaps serve to indicate what is envisaged for electronic invoice reform in the UK. At Saffery, we've been following global developments in electronic invoicing with interest and we are well placed to advise clients on implementation, should the UK follow the lead set by many countries.