The Future of Invoices and Receipts: Why Businesses Must Go Digital

The Decline of Paper Receipts

It has become increasingly common for shops and restaurants to ask customers, “Do you want a receipt?” Saying no may feel like an environmentally friendly choice, but for business customers, this can be a costly mistake.

While individuals do not usually need receipts for personal purchases—since consumer rights remain valid and alternative evidence such as bank statements may suffice—the rules are far stricter for businesses. When claiming expenses for tax purposes, receipts and invoices are essential.

Why Receipts Matter for Tax Purposes

HMRC treats receipts and invoices as the primary proof that a business expense has been incurred. Without them, expense claims can be rejected. In more serious cases, missing or poor records can lead to penalties, additional tax assessments, or closer scrutiny from HMRC.

Recent tribunal decisions clearly demonstrate HMRC’s firm approach to record-keeping.

Lessons from Recent Tax Cases

The case of Mediability v HMRC [2023] UKFTT 315 (TC) highlights the risks of relying solely on bank statements. The taxpayer attempted to justify business expenses without supporting receipts. The Tribunal ruled that bank statements alone were insufficient, resulting in many expense claims being disallowed.

Similarly, in T Healy v HMRC [2012] TC01940, actor Tim Healy claimed deductions for accommodation, subsistence, and taxi fares while working in London. Although some costs were accepted, his subsistence and taxi claims were rejected because he could not provide receipts to confirm the expenses were business-related.

These cases reinforce a simple message: without proper evidence, legitimate expenses may still be denied.

Moving Towards Digital Record-Keeping

For businesses that deal directly with consumers—such as shops and restaurants—paper receipts will continue to play a role. However, HMRC strongly encourages businesses to scan and store receipts digitally.

The introduction of Making Tax Digital (MTD) marks the first major step toward a fully digital tax system, signalling a long-term shift away from paper-based records.

E-Invoicing vs Paper Invoices

Many B2B businesses have already reduced or eliminated paper invoices, replacing them with e-invoicing.

E-invoicing involves the electronic exchange of invoice data directly between supplier and customer systems. Unlike emailed PDFs or paper invoices, e-invoices are created using specialised software and transmitted in structured electronic formats. This allows invoices to be automatically received, processed, and integrated into accounting systems—reducing manual data entry, errors, and paperwork.

Mandatory E-Invoicing: What’s Coming

In the Autumn Budget 2025, the UK government confirmed plans to make e-invoicing mandatory for all VAT invoices from April 2029. Under this requirement, VAT-registered businesses will need to generate, send, and store invoices in approved electronic formats that can be automatically processed by tax authorities. Further details will be outlined in a formal roadmap to be published in the 2026 Budget.

This move is not unique to the UK. Several EU countries already mandate e-invoicing, with others—such as Belgium, France, and Poland—introducing systems from 2026. Each country has adopted a different approach:

• Belgium will initially focus on invoice transmission methods.

• France will use approved private platforms for invoice exchange and reporting.

• Poland plans real-time tax reporting, where invoices pass through a government platform, are validated, assigned reference numbers, and then sent to customers.

HMRC is closely monitoring these systems to inform the UK’s own implementation.

Practical Steps for Businesses

To prepare for mandatory e-invoicing, businesses should consider adopting modern accounting software or dedicated receipt-capture apps. Many systems already extract data automatically from emailed invoices, helping businesses save time, reduce errors, and maintain compliant digital records that meet both current and future HMRC requirements.

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