Most UK Firms Unprepared For EU Invoicing Directive

by Robert Lee, Tax-News.com, London

03 October 2003

Research conducted by accounting firm Deloitte and Touche has found that less than half of UK firms are fully prepared for or even aware of the European Union Invoicing Directive, just four months before it comes into force on 1 January next year.

"Lack of standardised VAT invoicing rules has given rise to huge administrative burdens and considerable uncertainty for companies conducting business across EU borders," observed Jane Curran, VAT partner at Deloitte. "In order to counter this confusion, the European Commission has approved the new invoicing Directive, which has the ultimate objective of simplifying and harmonising VAT invoicing requirements throughout the EU. The Directive also allows businesses to issue electronic invoices, which should reduce costs and improve the speed of payment between suppliers and customers within the EU member states."

All businesses engaging in cross border transactions within the EU will be affected by the Directive, and Deloitte has urged firms to review their invoicing procedures to ensure that they are in compliance with the new rules. "Where businesses do not issue valid VAT invoices, their customers may be unable to recover the VAT charged. This is clearly a commercial issue and most businesses would want to avoid upsetting their clients in this way," warned D&T, noting also that the EU will impose penalties on firms who do not comply with the new regulations.

"According to a recent Deloitte client questionnaire," continued Ms Curran, "only 19% of businesses surveyed currently issue electronic invoices. However, a further 37% of businesses were looking to introduce electronic invoicing in the next 12 months."

"The move towards electronic invoicing is a logical step for businesses" Curran observed, "on average it costs £4.50 to issue and process a paper invoice, whereas electronic invoicing often leads to as much as an 80% saving on this cost."

According to D&T, the Directive establishes:

• 9 mandatory items of information that must be included on every invoice;
• 5 additional mandatory items of information for specific circumstances;
• Simplified arrangements for small businesses and small value invoices;
• The right to send invoices electronically without prior regulatory authorisation;
• Provisions around the security and format of electronic invoices;
• Provisions for the outsourcing of invoicing operations to third parties;
• Guidelines with respect to the location and method of storage of invoices.

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