Paper or electronic invoices? Pros, cons and the rules
Paper and electronic invoices carry the same weight
It’s up to you whether you issue VAT invoices on paper or electronically. HMRC accepts both, and you don’t need to tell HMRC when you switch.
An electronic invoice is sent and stored electronically, without a paper duplicate. It can be:
unstructured, such as a PDF attached to an email,
structured, such as an XML file your customer’s software reads automatically.
One invoice, one format
Sending the same invoices to the same customer on paper and by email is a dual system. HMRC allows it only during a controlled trial of e-invoicing. After that, the electronic invoice is the legal document.
What HMRC requires
Both formats must contain the same details, for example your VAT registration number, the tax point, the VAT rate and the total VAT in pounds sterling. Our guide to VAT on your invoices explains the rest.
Electronic VAT invoices must also meet three conditions:
Customer agreement. Your customer must agree to receive invoices electronically. A clause in your terms or a confirming email is a simple record.
Authenticity, integrity and legibility. It must be clear who issued the invoice, that nobody changed it and that it can be read. You choose how: an audit trail linking the invoice to the order and payment, an advanced electronic signature, or EDI.
Secure storage. You keep the invoice and this evidence for the whole storage period and show it to HMRC in readable form when asked.
Digital records and Making Tax Digital
Making Tax Digital (MTD) requires VAT-registered businesses to keep VAT records in compatible software and file VAT Returns through it. MTD for Income Tax also applies to some sole traders and landlords.
MTD covers records, not invoices
HMRC doesn’t require you to keep invoices digitally. A scan can replace a paper original if it holds all the VAT details and stays authentic, unaltered and legible.
How long to keep invoices
The periods are the same for both formats:
VAT records: normally 6 years.
Sole traders: at least 5 years after the 31 January submission deadline for the tax year.
Limited companies: 6 years from the end of the last company financial year the records relate to, sometimes longer, for example after a late Company Tax Return.
Our tips for digital invoice archiving help you keep files easy to find for that long.
Paper invoices: pros and cons
Pros
No customer agreement or technical set-up needed.
Suits customers who don’t work with electronic documents.
Cons
Printing and postage cost money.
Delivery takes days, which delays payment.
Paper can be lost or damaged.
The archive takes up space for years.
Electronic invoices: pros and cons
Pros
Delivery in seconds, so customers can pay sooner.
No printing or postage.
Easy to search and back up.
Structured invoices load straight into accounting software.
Cons
You need your customer’s agreement.
You must prove authenticity for the whole storage period.
Without backups, data can be lost.
Fake invoices imitating real suppliers arrive by email too.
Is e-invoicing mandatory in the UK?
Not at present. The government has announced plans to move VAT invoices to a structured electronic format in the future. Under that regime, a PDF is not expected to count.
Switching to electronic invoices
Agree the format and an invoice email address with each customer.
Store each invoice with the order and proof of payment.
Back up in two places.
Check any unexpected invoice from a “known” supplier before paying.
Which format to choose
Electronic suits most sole traders and small companies: faster, cheaper and easier to store.
Paper makes sense for customers who decline electronic invoices.
A mix works, as long as each customer gets one format, not both.
If you’re choosing software, see how online invoicing works in practice.
FAQ:
Is a PDF invoice sent by email valid?
Yes, if it contains the same details as a paper invoice and your customer has agreed to receive invoices electronically.
Do I need to tell HMRC that I’m switching to electronic invoices?
No, but your system for issuing and storing them must meet HMRC’s conditions.
Can I scan paper invoices and throw away the originals?
Yes, if the scan holds all the VAT details and stays authentic, unaltered and legible for the whole storage period.
Does Making Tax Digital mean I must send electronic invoices?
No. MTD covers your VAT records and VAT Returns. You can still issue paper invoices.
