UKeAG questions HMRC’s guidance on electronic invoicing compliancy
The UK e-invoicing advocacy (UKeAG), the UK National forum on e-invoicing, has criticised HMRC’s interpretation of the European Commission Directive 2010/45/EU.
The new directive is designed to simplify understanding of how invoices can be tax compliant and aims to encourage more widespread adoption of electronic invoicing. The Chancellor of the Exchequer, George Osborne, has announced that the directive will be implemented in the UK from 1 January 2013.
In order to implement the directive some changes need to be made to existing UK VAT invoicing rules. A technical note published by HMRC on 31 May, ‘VAT: changes to VAT invoice rules,’ outlines these proposed changes. The UKeAG has said that “the HMRC note creates confusion by not transposing the new directive faithfully.” The forum are concerned that the proposed changes are too vague and by lacking examples of how e-invoices can be tax compliant will, in fact, reduce clarification for UK business.
While it was previously possible for EU member states to impose methods of guaranteeing the authenticity and integrity of an invoice, the new EC Directive does not allow this. There has never been a legislated method for ensuring authenticity and integrity of an electronic invoice in the UK. HRMC did, however, suggest examples of ways to do this – electronic signatures, electronic data interchange (EDI) or "any other means for supplies within the UK."
The way that HMRC have interpreted the new Directive means that they have removed these examples and have only suggested methods such as ‘business controls’ and a ‘reliable audit trail’ are sufficient to ensure compliancy. However, there is no guidance on how ‘business controls’ and a ‘reliable audit trail’ can do this and instead the HMRC have advised that interpretation of the new rules is down to the business. The UKaAG claim that this will mean companies will be reliant on the judgement of tax advisors which could open e-invoicing methods to interpretation and scrutiny.
While it is the case that the new Directive removes governments’ ability to legally impose any particular method, Article 233 clearly shows that they can promote working examples if they wish. The UKeAG has said, “By denying UK businesses the clear guidance needed to feel confident about e-Invoicing implementation, many companies will be discouraged from implementing this cost-saving and efficiency aid.” The forum has therefore suggested that electronic signatures and electronic data interchange (EDI) remain in the guidelines as these working examples.