At the same time as the French government announced plans to mandate e-invoicing, the UK government confirmed it is set to act on late payments, the scourge of the SME and something that is estimated to cost the economy £billions each year.
eInvoicing to become mandatory in France
With the EU version of Making Tax Digital (MTD) – the UK’s long planned singular tax assessment, billing, and collection system – looming on the horizon, France has taken the lead by mandating the use of digital invoicing from 2026.
Moving all invoicing to electronic systems will make the calculation and assessment of corporate and personal tax much easier. The general concept behind MTD, and its EU equivalent, is that if all transactions and accounts are held electronically, the tax authorities can see what money is moving where and when and accurately calculate taxes payable in a timely fashion. This works across both commercial and personal taxation, with the end game being the removal of regular returns as all taxes will have been calculated in real time at the point of transaction and then collected automatically.
As well as offering the French government the opportunity to progress with digitised taxation, they say that einvoicing can only help with faster presentation and payment, a major issue for SMEs. In 2021 the French government legislated for domestic B2B invoicing to go digital along with reporting of various in-country and cross border transactions. This latest move will see all invoicing move to electronic means, signalling an end to manual and paper-based invoicing.
Ultimately, like MTD in the UK, the tax authorities in the EU will be able to see funds moving between bank accounts, interest payments, loans, sales, and purchases digitally through accounting systems and standard reporting that banks and investment houses will be obliged to implement. Each person and/or business will then have an individual tax account into which any transaction associated with them will pass. The tax authority will then be able to assess their tax liability and request payment accordingly. It is hoped this will make the process of tax calculation far easier, timelier and will therefore reduce the cost of collection and give better protection against fraud, tax evasion and tax avoidance.
UK government set to act on late payments
In a related move, the UK government has finally said it is about to publish its guidance on how it will tackle late payments between businesses in the UK. Their (ironically) long-awaited strategy is likely to see a more interventionist approach being adopted with some legislative changes and greater clarity for key sectors – notably the construction industry which has a reputation as one of the worst for late and withheld payments. It is also likely to include packages of support for SMEs from guidance on negotiating payment terms through to advice on the benefits of einvoicing for faster payment and improved cash flow.
The remit of the Small Business Commissioner is also expected to be expanded, giving it the ability to open investigations and publish reports on serial late payment offenders.
The government strategy has been demanded by industry organisations for some time who cite the cost to the UK economy of late payments costing £billions and resulting in increasing number of businesses failing. Whilst research shows that there is widespread liberty taking with payment terms, some big names have also built up a poor reputation – including some government departments!
The rise in online portal businesses and the gig economy – that ‘employ’ workers or offer a shop window to individuals and very small enterprises, allowing them to sell goods and rent property – has undoubtedly provided a boost to the economy. However, in the research gathered ahead of the publication of the strategy, many of these portals are named because of their poor performance on paying their suppliers – often individuals and micro businesses that rely on good cash flow. Amazon, Etsy and booking.com have all been singled out for criticism, with some anecdotal evidence suggesting payment terms of between 60 and 90 days to not be unusual.