Check what you need to do if you're sending, receiving and storing VAT invoices in an electronic format.
1.1 What this notice is about
This notice is about issuing, receiving and storing VAT invoices in an electronic format.
1.2 Who should read this notice
You should read this notice if you:
- issue, or are intending to issue, your VAT sales invoices electronically
- receive, or are intending to receive, VAT invoices in an electronic format from your suppliers
2. Issuing electronic VAT invoices
2.1 Electronic invoicing
Electronic invoicing is the transmission and storage of invoices in an electronic format without duplicate paper documents. The electronic format may be a structured format such as XML or an unstructured format such as PDF.
2.2 The benefits
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
This list is not exhaustive, but it indicates some of the principal benefits.
2.3 The electronic VAT invoices option
It’s up to you whether you issue paper or electronic VAT invoices.
2.4 Paper and electronic VAT invoicing at the same time
If you issued electronic and paper invoices for the same supplies, or to the same customers, you would be running a dual system. You may only do this if you are running a controlled trial of electronic invoicing systems. Once the trial is over, you must stop running the dual system. The electronic invoice then becomes the legal document for VAT purposes.
If you have a specific business need to run a dual system, you should contact VAT general enquiries who’ll look at the information you provide and decide whether an exception can be made in your case.
2.5 Telling HMRC that you’re intending to issue invoices electronically
You do not need to tell HMRC that you’re intending to issue electronic invoices, but you must be satisfied that your system for issuing, receiving and storing electronic invoices complies with our requirements as explained in this notice.
If you have any questions about whether the electronic invoicing methods you have chosen comply with our requirements, you should contact VAT general enquiries.
3. Contents of electronic invoices
3.1 Information electronic invoices must contain
Electronic invoices must contain the same information as paper invoices. You can find general information about VAT invoices in section 16.3.1 of VAT guide (Notice 700).
There are additional rules about the content of your invoices if you are making supplies to the EU. You can find these in paragraph 16.16 of VAT and the single market (Notice 725).
3.2 Information required on a tax invoice
|Information required||Further information|
|An identifying number||A sequential number based on one or more series which uniquely identifies the document.|
|The time of the supply||This is the ‘tax point’ and is based on the date:
- goods are supplied
- a service is completed
- you receive a payment before you either make the supply or issue the invoice
|The date of the issue of the document||The invoice transmission date or the date you make the invoice available to your customers.|
|Your name, address and VAT registration number||For cross border supplies the registration number must be preceded by the letters ‘GB’.|
|Your customer’s name and address||For cross border supplies, you must show your customer’s VAT registration number if any, preceded by the country identifier.|
|A description sufficient to identify the goods or services supplied; and for each description the following||For a supply of goods, you may use a code to identify products, provided one of our visiting officers can easily check the code against a full description at both your and your customer’s premises, for example, a catalogue.|
|The unit price||For services, the countable element might be, for example, an hourly rate or a price for standard services. If the supply cannot be broken down into countable elements, then the total tax-exclusive price will be the unit price.|
|The quantity of the goods or the extent of the services||—|
|The rate of VAT||—|
|The amount payable, excluding VAT, expressed in any currency||—|
|The rate of any cash discount offered||—|
|The total amount of VAT chargeable, expressed in sterling||—|
3.3 Batches of invoices
If you are sending batches of invoices to the same customer, you may record details that are common to the individual invoices once per computer file rather than once per invoice.
For example, instead of repeating the full name and address of your customer on every invoice in the batch, you could include the full information on the batch header, and use an abridged or coded version of that information within each individual invoice message.
3.4 Credit notes
Credit notes, or documents such as debit notes that fulfil the same function as credit notes, must contain both:
- the same details as the original invoice to which they refer
- sufficient information to identify the original invoice
You can find information about the details you need to include on credit notes you raise for UK supplies in section 18 of VAT guide (Notice 700).
If you issue invoices to customers in EU member states, documents which amend those invoices, for example, credit notes or debit notes, must contain the same information as was required on the original invoice.
You will need to take care to post these amending documents correctly in your VAT accounts.
3.5 Currency on invoices
You may express the amounts in any currency. But you must express the total amount of VAT in sterling where there is a positive rate of VAT due in the UK.
4. Conditions for electronic transmission
4.1 When to invoice electronically
You may invoice electronically where the authenticity of the origin, integrity of invoice data, and legibility can all be ensured, and your customer agrees to receive invoices electronically:
- ‘authenticity of the origin’ means the assurance of the identity of the supplier or issuer of the invoice
- ‘integrity of content’ means that the invoice content has not been altered
- ‘legibility’ of an invoice means that the invoice can be easily read
You are free to choose a method of ensuring authenticity, integrity, and legibility which suits your method of operation. Examples of approaches for ensuring authenticity and integrity include:
- an advanced or ‘qualified’ electronic signature (read paragraph 4.2)
- Electronic Data Interchange (EDI) (read paragraph 4.3)
- business controls which create a reliable audit trail between an invoice and a supply of goods or services (read paragraph 4.4)
4.2 Advanced electronic signature
An advanced electronic signature is a digital signature which is:
- uniquely linked to the signatory
- capable of identifying the signatory
- created using means which the signatory can maintain under his sole control
- linked to the data to which it relates in such a manner that any subsequent change to the data is detectable
A ‘qualified’ electronic signature is an advanced electronic signature which has the additional attributes of being both:
- based on a qualified certificate
- created by means of a secure signature creation device
EDI (electronic data interchange) is a computer-to-computer exchange of structured data which permits automatic processing by the recipient. It is traditionally most commonly used for high-volume data transfers between businesses, using agreed standards (for example, UN/EDIFACT) to structure the data.
There should be an interchange agreement between the EDI trading partners which makes provision for the use of procedures which guarantee the authenticity of the origin and integrity of the data. Commission Recommendation 94/820/EC provides a model EDI interchange agreement. Examples of the procedures covered by such agreements include:
- use of secure networks
- use of messaging protocols which ensure authenticity and security, such as AS2 (Applicability Statement 2)
- controls over access to networks (for example, checking ‘trading relationships’)
- syntax checking of data in accordance with the rules of the transmission standard
- summary file control reporting
4.4 Reliable business controls
In the course of a business-to-business transaction, a variety of documents will be produced.
A sales order-to-cash process, for example, will typically produce:
- order documents
- delivery documents
- invoices and remittances
These documents will be linked in an audit trail. By comparing the invoice data to the data on the other documents within the audit trail and one of the following:
- any other data (for example trading partner master data held in accounting software)
- documents relating to the supply
You should be able to be certain about both the:
- authenticity of origin of the invoice
- integrity of the invoice data
In order to use a supporting document to verify the data on an invoice, you need to have accounting controls in place which ensure the reliability and independence of the data in that document.
These internal controls may be:
- system controls, for example, a control which prevents a sales order being changed after the invoice has been issued
- procedural controls, for example, a purchase order must be issued before an invoice is received
- authorisation controls, for example, a user who has access to maintain supplier master data can not enter invoices from that supplier
You may use whatever reliable audit trail and internal controls work for your particular circumstance.
4.5 Systems you can use
Your system may be able to guarantee the authenticity of the origin, and the integrity of the invoice data by some other means than:
- digital signatures
- business controls creating a reliable audit trail between invoice and supply
HMRC will accept electronic invoicing in these circumstances as long as you can:
- impose a satisfactory level of control over the authenticity and integrity of your invoice data
- meet all the other conditions in this notice
Methods of satisfactory control might include:
- security of networks and communication links
- access controls
- message transfer protocols (for example, https)
For more information about the levels of control you will have to apply, read paragraphs 4.8 and 5.2.
Please note that some tax authorities in EU member states may not accept invoicing where the authenticity of the origin and integrity of the invoice data are guaranteed using these means. If your customers will not be able to use your invoices as evidence that you have made a taxable supply to them, they may not be willing to do business with you.
4.6 VAT compliant systems
If you want to invoice electronically but your system is not covered in paragraph 4.1, and you are unsure whether your system meets the requirements in paragraph 4.5, then you can contact HMRC. If possible, you should provide:
- an indication of the standard under which the invoice message has been drafted
- a formatted ‘dump’ of an example invoice
- an overview of the main system concepts, including control over authenticity and integrity of data
We’ll let you know if any further information is needed.
4.7 Formats for electronic invoicing
As long as that the relevant invoice messages used contain the required data, we’ll accept a wide variety of electronic invoice message formats. Examples include:
- traditional EDI standards such as UN/EDIFACT, EANCOM and ODETTE
- XML-based standards
- comma-delimited ASCII, PDF
You may want to check whether your customer’s system can accept invoices in the format you use before agreeing with them to invoice them electronically.
4.8 Controls over the transmission of invoices
You must transmit your invoices in a secure environment, using industry-accepted authenticity and security technologies on either the:
- messages themselves
- communication links or networks over which the invoices are transferred
Examples of these include http-s, SSL, S-MIME and FTP.
Alternatively, you may use other procedural means which offer similar assurances.
4.9 Protecting the authenticity and integrity of invoices
You must be able to ensure the authenticity and integrity of your invoice data during the transfer between you and your customer.
To minimise burdens on business, HMRC is not over-prescriptive in specifying the detailed forms that such control may take. Where possible, HMRC prefers to rely on good business practice or businesses’ own controls.
4.10 Internal controls you must maintain
In order to establish the authenticity and integrity of your electronic invoicing you will need to be able to demonstrate that you have control over the:
- completeness and accuracy of the invoice data
- timeliness of processing
- prevention, or detection of, the possible corruption of data during transmission
- prevention of duplication of processing (by the person who receives the invoice)
- prevention of the automatic processing, by the person who receives the invoice, of certain types of invoice on which VAT may not be recoverable - for example, margin scheme invoices
Additionally you must:
- be able to demonstrate that you have a recovery plan in case of a system failure or loss of data
- maintain an audit trail between your electronic invoicing systems and the internal application systems which are used to process the electronic invoices
4.11 Supplies to EU member states
If you are issuing electronic invoices to EU member states, those invoices must meet the UK’s conditions for electronic invoicing. You may want to check whether your customer’s system can accept invoices in the format you use before you mutually agree to invoice them electronically.
EU member states are required by law to allow electronic cross border invoicing. Generally, the rules which apply to the cross border electronic exchange of tax documents are those of the country in which the supplier (normally the issuer of the invoice) belongs.
But if you are making supplies of digital services to consumers in other EU member states, then the invoicing rules of the consumer’s member state apply.
4.12 Cross border electronic invoicing
If you issue an invoice (either paper or electronic) to a customer in an EU member state, the invoice must include the:
- letters ‘GB’ (the country identifier for the UK), as a prefix to your VAT registration number
- VAT registration number, if any, of your customer, prefixed by their country identifier
Credit notes must show the same information as the original invoices where your supply was made to a customer in an EU member state.
4.13 Transmitting electronic invoices to countries outside the UK or an EU member
You may transmit invoices and credit notes electronically to third countries (that is, countries which are not member states of the EU), provided you have confirmed that this is acceptable with that country’s tax authorities.
5. Conditions for electronic storage
5.1 Protecting the authenticity, integrity and legibility of stored invoices
You must be able to ensure the authenticity, integrity and legibility of your invoice data both during and after application processing. Read paragraph 4.9 for more details.
5.2 Controls on the storage of electronic invoices
- be able to guarantee the authenticity and the integrity of the content of your source documents throughout the storage period by either electronic or procedural means
- store all the data related to your invoices, including such evidence as is required to demonstrate that authenticity and integrity has been ensured
- be able to recreate the invoice data as at the time of its original transmission or receipt, and present the invoice data in a readable format
- keep history files so that you can find the appropriate details from any particular time in the past if one of HMRCs visiting officers asks you to do so
5.3 Scanned paper invoices stored electronically
You may store what were originally paper VAT records in an electronic format as long as you can meet the requirements explained in this notice for ensuring authenticity, integrity and legibility. Authenticity and integrity must be maintained during the conversion process as well as during storage.
5.4 How long to store electronic invoices
The same rules apply to storage of electronic invoices as to paper invoices. You must normally keep copies of all the invoices you issue and all the invoices you receive for 6 years. If the 6-year rule causes you serious storage problems or undue expense, you should contact VAT general enquiries for advice. We may be able to allow you to keep some of the records for a shorter period.
5.5 Storing electronic invoices in an EU member state
HMRC recommends that you maintain online access to your records if you store them outside the UK. You must still be able to produce any records HMRC requires from you in a readable form, and within a reasonable period of time, at a mutually agreed place. The records you produce must comply with the requirements given in paragraph 4.8.
5.6 Storing electronic invoices outside the UK or the EU
You can store electronic invoices outside the UK or the EU as long as:
- the country where you are storing your invoices respects UK and European Data Protection principles regarding the storage of personal data (names and addresses, and so on)
- you can produce any records HMRC requires from you:
- in a readable form within a reasonable period of time
- at a mutually agreed place
If you do this, HMRC recommends that you maintain online access to your records.
6. Access to electronic systems
6.1 HMRC access to your systems
If you choose to issue, or receive, electronic invoices, you must either:
- retain them in a readable form
- be able to produce them in a readable form without delay
In order to assure electronic systems, HMRC may request access to:
- the operations of any computer systems which produce or receive VAT invoices or disagreement documents, and to the data stored on them
- your supporting documentation including your file structures, audit trail, controls, safe keeping; and information about how your accounting system is organised
- information about the system’s interrogation facilities
HMRC must be able to take copies of information from your system. You may be able to meet your obligations as regards production of records by giving them:
- physical access to your systems at your premises
- indirect access (providing information on electronic media, or possibly via remote access to your systems)
- a resident audit programme installed at the request of the visiting officer
- any other reasonable method which you agree with HMRC
7. Receiving electronic invoices
7.1 Storing electronic invoices you receive
If you receive electronic invoices from your suppliers, you must meet the conditions for storing them which are explained in section 5.
These conditions also apply if you store electronic invoice versions of invoices which you received on paper as part of your VAT records.
7.2 Accepting electronic invoices from your suppliers
If you do not want, or are not able, to receive electronic invoices you should ask your suppliers to issue you with paper invoices. This is a commercial matter between you and your supplier.
7.3 UK conditions that apply to supplies you receive from other countries
If you receive electronic invoices from a supplier in another country, the format of those invoices will have to meet the requirements of your supplier’s tax authority. You may want to check whether your system can accept invoices in this format before you agree to receive them electronically. This is a commercial matter between you and your supplier.
Electronic invoices and credits notes from other countries must contain enough information to allow you to calculate:
- import VAT, in the case of goods
- output tax in the case of reverse charge services
8. Electronic invoices issued by customers or third parties
8.1 Customers issuing an electronic invoice on your behalf
You will need to make sure that any electronic self-billing system can recognise self-billed invoices so that the input tax and output tax are accounted for correctly.
You can find out about the rules for self-billing in Notice 700/62: self-billing.
8.2 Third parties issuing your electronic sales invoices
You may choose to outsource the issuing of your electronic sales invoices to a third party. If you do this, you should bear in mind that all the legal obligations with regard to the contents, storage and production of the invoices issued remain with you.
It’s important that you are sure that invoices created on your behalf meet the requirements in this notice. You may want confirmation of this to form part of your outsourcing agreement.
Similarly, these principles apply if you choose to outsource processing and storage of the purchase invoices you receive.
9. Inability to meet the e-invoicing conditions
9.1 If you cannot meet the conditions
If you cannot meet HMRC’s conditions for transmission and storage of electronic invoicing, you will have to issue paper invoices. But if you want advice on what you would have to do to be able to meet the conditions, you should contact VAT general enquiries.
9.2 Failing to meet the conditions
If you have issued and stored invoices electronically, but have failed to meet HMRC’s conditions, you will have to issue paper invoices until HMRC is satisfied that your system is acceptable.
If you persistently fail to meet the conditions, you may be liable to a penalty.
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