The UK has finally set a firm date for mandatory business-to-business e-invoicing. From April 2029, VAT invoices will need to be issued electronically, marking a significant move from decades of reliance on PDFs, paper documents and email-based processes.
This shift is an important milestone for UK businesses on their digital tax journeys. Structured, machine-readable invoices improve data quality, reduce human error and enable automated processing for businesses and tax authorities alike. However, the current mandate does not include requiring real-time reporting of invoice data to HMRC. Without this additional layer of visibility, the UK risks missing a critical opportunity to further reduce its VAT gap.
Why the VAT gap remains a challenge
HMRC’s latest estimates put the UK VAT gap at £8.9 billion for 2023–24, equivalent to around 5% of total VAT liabilities. While this figure has narrowed in recent years, it still represents a significant loss of public revenue – money loss that impacts businesses and could otherwise support public infrastructure and economic growth.
The main challenge is ensuring greater visibility into VAT transactions. Fraud, evasion and error are far harder to detect when transaction data is fragmented or is significantly delayed due to backlogs. When tax authorities rely on delayed or incomplete information, oversight becomes a reactive rather than a preventative measure.
If the UK is committed to sustaining progress in closing the VAT gap, ensuring tax authorities have timely access to structured, real-time invoice data must be part of the solution.
The problem with today’s invoice processes
Despite years of digital transformation, many UK organisations still exchange invoices as PDFs or paper documents. These formats require manual data entry, and because they aren’t designed for automation there’s an increased risk of human error. This also introduces delays into approval processes as data is manually inputted and verified.
Lost documents, inconsistent data and manual checks all contribute to delays, meaning that VAT issues can often go unnoticed for months, or even years later. By the time errors surface, they are costly to resolve, and can lead to penalties if left uncorrected. These blind spots are not just inefficient for reporting, they increase the risk that errors or fraudulent activity goes undetected.
Why structured e-invoicing changes the equation
Structured e-invoicing fundamentally alters how invoices are created and processed. Instead of static documents, invoices become standardised data that flows directly between finance systems. Factur-X (aka Habrid invoice), for example, combines a human-readable PDF with an embedded XML file, ensuring the document remains accessible to customers, while also storing the structured invoice data in a format that systems can automatically process. These formats allow invoice information to be read and validated seamlessly, overall reducing errors and manual intervention.
For finance teams, this means faster processing and improved visibility across transactions. And for tax authorities, it creates a much stronger foundation for checking VAT accuracy and comparing records across systems, especially when handling large volumes of transactions.
Lessons from Europe – data quality paired with timing
However, improvements in data quality alone are not enough. International experience shows that the real impact comes when structured e-invoicing is paired with timely reporting. Several European countries have already taken this step, and their results offer valuable lessons for the UK.
In France, structured e-invoicing is delivered through State certified platforms alongside mandatory e-reporting, giving tax authorities near real-time visibility into invoice flows. France’s certified platform model (now known as Plateformes Agréées, or PAs) shows how standardised transmission channels can reduce fragmentation and bring greater consistency to the market.
Italy’s clearance model goes further by validating invoices before they reach the buyer, shifting VAT control upstream.European Commission data shows that Italy’s VAT compliance gap narrowed from 19.3% in 2019 to 15% in 2023. Although this can’t be attributed to one reform alone, the move toward mandatory e-invoicing and expanded digital reporting is widely seen as a key contributor to improved compliance.
Belgium offers another lesson in the importance of consistent, interoperable data exchange. Its use of Peppol network ensures invoice data can move seamlessly across sectors and borders, reducing friction and creating a common standard that businesses can rely on.
Taken together, these models show that when invoice data is structured and timely, VAT oversight becomes continuous rather than reactive.
Acting now, not waiting for 2029
Although the UK’s e-invoicing mandate does not come into force until 2029, organisations can start preparing now, and doing so can deliver benefits well before the deadline. Finance teams should start by reviewing existing invoice flows to identify where unstructured formats or manual steps introduce risk or delay. Engaging suppliers and customers around structured invoice standards, such as Peppol, can help improve data quality across the supply chain. At the same time, assessing whether existing ERP and accounting systems can support structured formats like UBL or Factur-X is critical to future readiness.
The UK’s move toward mandatory e-invoicing lays an important foundation for more effective VAT control. But to truly close the VAT gap, strong data quality should be paired with timely reporting. By combining structured e-invoicing with real-time VAT reporting, the UK has an opportunity not only to reduce leakage, but also to build a more transparent and trusted tax system.
Aihedan Dimulati
Aihedan Dimulati is Global Lead E-Invoicing at Quadient.
