The UK’s Smart Second Mover Approach to E-Invoicing Requirements

As countries around the world continue adopting mandated e-invoicing frameworks, the UK is evaluating its own approach, one that could have significant implications for how businesses manage digital tax compliance in the years ahead. 

I recently discussed centralized and de-centralized e-invoicing models. These models featured prominently in the consultation that the UK’s tax authority His Majesty’s Revenue and Customs  (HMRC) issued in February, which invited taxpayer input on the standardized e-invoicing rules HMRC is expected to propose this fall.

While not yet part of the EU’s ViDA initiative-which proposes sweeping reforms to VAT reporting and real-time e-invoicing across member states- the UK is closely monitoring developments and assessing the implications of aligning with similar principles.

The consultation explicitly explores both centralized and decentralized e-invoicing models-including the increasingly popular 4 corner exchange architecture- and poses important questions to businesses and industry stakeholders:

• What model (centralized vs. decentralized) would work best in the UK’s current commercial and regulatory environment?
• How would a decentralized 4-corner model impact your business operations?
• What lead time would be necessary to prepare for a potential mandate?
• What challenges or barriers could affect your ability to comply?
• Should real-time reporting be applied to B2B and B2G transactions alike?

The decisions HMRC makes in response to this feedback will shape not just technical requirements, but also the compliance and operational strategies that UK organizations must adopt.

A recent survey report conducted for Vertex by Sapio Research provides valuable insight into how global businesses are preparing for such mandates. With responses from over 1,100 tax, finance, and IT leaders, the report shows:

• There is a positive sentiment among businesses that the widespread adoption of mandated e-invoicing will be beneficial by improving data accuracy, facilitating better policy decision-making, and enhancing economic growth and global competitiveness.
• Efficiency gains and cost savings emerge as prominent benefits of e-invoicing adoption. Amongst markets that are yet to adopt mandated e-invoicing, it is expected that efficiency gains and cost savings will also be the greatest benefits.
• More than half of responding organizations are seeking a centralized global platform to streamline compliance and reporting.
• Organizations are poised to enhance their e-invoicing strategies further by improving the integration of separate systems involved in the process and by aligning e-invoicing with broader technical transformations over the next two years.
• A substantial number of businesses are already utilizing AI to support e-invoicing, with adoption highest in Nordic countries. The most prominent use case of AI is for customer support and query resolution.

By taking a second mover approach, the UK gains the opportunity to adopt and implement an e-invoicing framework that reflects global best practices, avoiding many of the early missteps seen in first-movers countries. This includes:

• More time for stakeholder engagement and industry consultations
• A clear view into scalable technical architectures
• The ability to align with evolving international standards (e.g. EN16931, ViDA, Peppol)
• A chance to foster broader cross-functional buy-in before enforcement begins

However, this position also comes with responsibilities and risks. The longer the UK waits to define its position, the more likely it is that businesses will develop fragmented solutions or delay readiness investments. The challenge will ensure that this strategic patience doesn’t lead to inertia.

Whether a mandate comes into effect soon or is still several years away, UK businesses are well advised to begin internal alignment now. Cross-functional teams-tax, IT, finance, procurement, legal, compliance and supply chain- should all be part of the early discussions. Their involvement is crucial for understanding impacts, preparing systems, and building agile processes that ensure readiness from day one.

HMRC would have taken note of what has worked and what hasn’t, which puts it in a unique position to establish a robust, efficient system that aligns with international best practices. As a smart second mover, the UK can transform its approach to e-invoicing into one that not only ensures compliance but drives innovation and economic growth. 

If you’re a UK business, we recommend reading our related blog: Essential Preparations for E-Invoicing Compliance.