Last reviewed 27 September 2012

Paul Clarke reports on the Second Directive on VAT invoicing (Directive 2010/45/EU), which was adopted on 13 July 2010 and must be applied by Member States with effect from 1 January 2013.

The Invoicing Directive

Also known as the Invoicing Directive, this legislation aims to promote and further simplify invoicing rules by removing certain barriers identified when implementing and using the main VAT Directive (2006/112/EC).

Most importantly, it is intended to establish equal treatment between paper and electronic invoices, ensuring that the same process for paper invoices can be applied for e-invoices, and seeks to promote the uptake of e-invoicing by creating freedom of choice supported by certainty with regard to certain key points.

Specifically, the directive recognises the obligation for invoices accurately to reflect actual supplies of goods and services and therefore requires that the authenticity of the origin, the integrity of the content and the legibility of invoices are insured from their issue until the end of the period of storage. This can be achieved through business controls that provide a reliable audit trail between the invoice and the supply and that assure the identity of the supplier or issuer of the invoice (authenticity of origin), that the VAT details (the invoice content required by the VAT Directive) on the invoice are unchanged (integrity of content) and that the invoice is legible.

The changes remove a number of options that were previously available to individual Member States and that have led to different rules in relation to VAT invoicing in the 27 EU countries. The aim is now to have a consistent set of rules that will be uniformly applied across the Union, making things simpler and removing uncertainty for businesses.

Helping with implementation

The European Commission has recognised that Member States may have problems with bringing this directive into national law, given its complexity, and is obviously keen to ensure that, as far as possible, all Member States interpret the various requirements in the same way. It has accordingly produced a set of explanatory notes aimed at providing a better understanding of the legislation. These guidelines, while not legally binding, should also provide businesses with useful information in order to help them adapt to the new rules. The notes are not comprehensive: only certain invoicing issues, for which it was thought desirable to provide explanations, have been covered. These include the issue, content and storage of invoices and invoicing rules for exempt insurance and financial supplies.

HMRC joins the debate

HM Revenue & Customs (HMRC) ran a consultation on implementation of the new VAT Directive between May and July 2012. It noted that the changes will assist business by removing or largely reducing current VAT obstacles to the use of electronic invoices, simplifying a number of existing VAT invoicing requirements, and removing some existing administrative burdens associated with these invoices. Many of the changes are, HMRC emphasises, already included in existing UK legislation. Its consultation document usefully outlines the minor changes that will be made to VAT regulations in order to implement other amendments. It also included draft legislation for technical consultation and promised that a summary of responses would be published on its website, together with a draft of the proposed changes to existing UK VAT legislation.

Among the issues covered by the HMRC consultation are:

  • simplifying the rules for electronic invoicing

  • removing the requirement to issue a VAT invoice for exempt supplies

  • the use of a simplified VAT invoice for supplies up to £250 in value

  • a reference on an invoice to explain the treatment of the supply

  • a time limit for issuing a VAT invoice for an EU cross-border supply.