Regulatory updates - United Kingdom

The UK government is taking a significant step toward modernizing its tax system by introducing e-invoicing, as announced by Chancellor Rachel Reeves. This new reform is part of the broader Digital Transformation Roadmap, with full implementation expected in 2025. The goal is to simplify financial processes for businesses and improve tax compliance across the country.

A public consultation will be launched soon to gather feedback from businesses on how best to implement e-invoicing. This will help ensure a smooth transition as the government prepares to make e-invoicing the standard process across private companies and government departments.

This initiative, set to roll out in spring 2025, is part of the government's effort to close the tax gap and enhance compliance. The details of the new e-invoicing framework will be finalized in the upcoming Digital Transformation Roadmap, outlining the vision for a more efficient and digital-first tax system.

The UK government has implemented a statute to legally compel e-invoicing in all public procurement through “The Public Procurement (Electronic Invoices etc.) Regulations 2019.”

A Procurement Policy Note (PPN) from the Cabinet Office said: “Contracting authorities and other contracting entities (utilities) are now required to receive and process supplier invoices that comply with the technical e-invoicing standard developed under the Directive.”

The requirements were applied to the central government last year, whilst local government bodies and utilities were given until 18 April 2020 to comply “but were okay to voluntarily do so earlier,” according to the PPN.

“The regulations require contracting authorities and entities to include in their contracts an express term which obliges them to accept and process undisputed invoices that comply with the technical e-invoicing standard,” said the PPN.

“The Directive aims to address the use of varied e-invoicing formats across the member states through the introduction of a standard. These varied formats cause unnecessary complexity and additional operating costs for businesses, public contracting bodies and contracting entities.”

Whilst the legislation came into force at a time of unique challenge on public sector supply chains, the prior introduction of the Peppol infrastructure into the NHS helped early adopters ensure far more robust supply chains during the first wave peaks of COVID-19.

Anna Micklewright, head of healthcare sales at Pagero, commented: “COVID-19 has shown the importance and frailty of public sector supply chains at a time when we rely upon them the most. Those suppliers that serve the public sector will rely on more efficient processes from their public sector partners and it's imperative that this can be implemented to manage services throughout. The UK e-invoicing legislation is an important first step in helping strengthen communications between suppliers and buyers.”

There will be no impact on businesses, customs or taxation during this period and EU law will continue to apply in the UK. Movement of goods from Northern Ireland to the UK and exports from Northern Ireland to the rest of the world will not be greatly affected.

The Protocol will become operational by 1 January 2021. These changes will be mandatory and stakeholders will be required to be prepared in time. One of the changes includes the introduction of a special VAT registration number for businesses in Northern Ireland. This identification number is an essential component of the system.

Goods traded between Northern Ireland and the EU will continue to be treated as intra-EU dispatches and acquisitions, including deductions and exemptions. This, however, will not apply to the supply of services. Services will be subject to UK VAT rules after the transition period post-Brexit. Supplies of goods and services made elsewhere in the UK will also be subject to UK VAT rules.

The Protocol provides EU rules concerning goods transferred to the UK:

• Transactions involving movement of goods between Northern Ireland and EU member states will be considered intra-EU transactions;
• Transactions involving the movement of goods between the EU and other parts of the UK will be considered imports/exports.

At the end of the transition period, all EU VAT rules concerning transactions in goods (supplies of goods, intra-EU acquisitions of goods and export/import of goods) will continue to apply in Northern Ireland as if it were an EU member state.

These changes will require IT adjustments from member states. The commission has proposed the changes early to urge member states to agree to the proposal so that the Protocol can be implemented well in advance of the end of the transition period.

In May 2018 Pagero AB joined a number of Irish organisations in a consortium to apply for EU funding under the European Commission’s Digital Connecting Europe Facility (CEF). The project reached a successful end when, in September 2019, Pagero passed all conformance and connectivity tests. As a result, Pagero is in a leading position to offer clients and partners a fully compliant eDelivery solution.

eDelivery AS4 common profile and four corner topology

CEF is an EU fund for Pan European infrastructure investment. The fund recommends the use of the AS4 messaging protocol for the secure electronic exchange of documents between public entities, businesses and citizens.

CEF eDelivery is based on a distributed model called the “four-corner model.” In this model, the back-end systems of the users don’t exchange data directly with each other but do this through Access Points. These Access Points are conformant to the same technical specifications and therefore capable of communicating with each other, ensuring interoperability.

CEF eDelivery project

The aim of the project was to upgrade the existing eDelivery solutions of Pagero and Document Centric Solutions (DCS) from the AS2 to AS4 profile to comply with the requirements set in the eIDAS (electronic Identification, Authentication and trust Services). Additionally, the move was made to promote the cross-border exchange of electronic documents in Ireland and Sweden.

The project consisted of The Institute of IT, Sligo, who acted as project coordinator of the consortium, which was composed of Pagero, Document Centric Solutions (DCS) and Tubbercurry Software. The project partners identified and successfully overcame several technical issues with the AS4 open-source implementations available in the market for both Java and .Net environments.

By late September 2019, both Pagero and Document Centric Solutions had successfully implemented the CEF eDelivery specifications, supporting the four-corner model and dynamic discovery functionality in their existing solutions.