In November 2024 the European Union approved new rules to streamline and harmonise VAT across Member States to better suit the changing and increasingly digital economy. Despite the UK leaving the EU, UK businesses with European customers will be caught by these changes.
Called VAT in the Digital Age (ViDA), it might also inform the UK government’s direction of travel when it extends further its Making Tax Digital programme over the next five years.
ViDA explained
ViDA will require all businesses selling to consumers and businesses to adopt electronic or e-invoicing.
E-invoices must be prepared in tightly defined electronic formats, that are machine-readable and comply with the European Standard EN16931. Invoices must also be issued within 10 days of the chargeable event.
E-invoicing will sit alongside a new digital reporting platform that will replace the current European Community Sales Listing. It will require businesses and, importantly, their business customers to submit e-invoice data on supplies and transfers of goods, and goods and supplies subject to the reverse charge mechanism.
Here, data must be submitted on a transaction-by-transaction basis.
Helpfully, a new single VAT registration platform will be introduced, allowing businesses to register for VAT in one EU country and manage VAT obligations across all Member States. The VAT reverse charge mechanism for B2B transactions will also be expanded, as will the current one-stop shop (OSS) to cover a greater range of B2B transactions.
ViDA timeline
Whilst ViDA applies to cross border trade, EU Member States can start issuing e-invoices for domestic supplies later this year. The first extension of the OSS is expected in 2027, with the single VAT registration a year later. E-invoicing and digital reporting will go live in 2030 with full harmonisation from 2035.
What does ViDA mean for UK businesses
UK businesses with establishments in the EU supplying B2B and B2C customers will be required to comply with the e-invoicing regulations, and that means starting to prepare for these changes now. UK businesses with no EU establishments will not need to comply with the e-invoicing rules but will need to supply information to their customers in order for them to comply with the Digital Reporting requirements.
Businesses established in Northern Ireland which supply goods into the EU are likely to be caught by ViDA, as they currently have to submit EC Sales Lists and Intrastats.
The first step is to understand whether the current technology stack has the capability for e-invoicing, receipt and processing. If not, it will need to be upgraded. That in itself might be a major undertaking and cost. E-invoicing should, however, ultimately lead to greatly reduced manual processing and increased operational effectiveness.
Perhaps the biggest risk to UK businesses is that they will lose important EU customers if they remain non-compliant, and that will hit the bottom line.
For further information on ViDA and how your business can get ahead of the changes, contact our expert below.
