HMRC has updated VAT Notice 700/63 – Electronic Invoicing in respect of “information required on a tax invoice” (para 3.2).
The Notice sets out what a business needs to do if it is sending, receiving and storing VAT invoices in an electronic format.
Electronic invoicing offers many advantages over traditional paper invoices. The rapid electronic transmission of documents in a secure environment may provide for:
- structured data for auditing
- improved traceability of orders
- decreased reliance on paper reducing storage and handling costs
- rapid access and retrieval
- improved cash flow
- security and easier dispute handling
A business does not need to inform, nor seek permission from, HMRC to use electronic invoicing.
We advise that any business periodically reviews its use of any invoicing system to ensure that:
- invoices contain all of the required information
- credit notes are properly issued and accounted for
- the authenticity of the origin, integrity of invoice data, and legibility are all appropriate
- its customers agree to receive invoices electronically
- there is an interchange agreement between EDI (electronic data interchange) trading partners which makes provision for the use of procedures which guarantee the authenticity of the origin and integrity of the data
- appropriate internal controls are in place
- system controls, eg; a control which prevents a sales order being changed after the invoice has been issued
- procedural controls, eg; a purchase order must be issued before an invoice is received
- authorisation controls, eg; a user who has access to maintain supplier master data can not enter invoices from that supplier
- the electronic invoice message format is acceptable. Examples include:
- traditional EDI standards such as UN/EDIFACT, EANCOM and ODETTE
- XML-based standards
- comma-delimited ASCII, PDF (this list is not exhaustive)
- the cross-border invoicing rules are adhered to
- the conditions for electronic storage are met
- HMRC can access required information
- invoices meet all the other conditions in the above Notice
If a business cannot meet HMRC’s conditions for transmission and storage of electronic invoicing, it must issue paper invoices.
There are penalties for incorrect invoices or systems.