European legislation designed to speed the introduction of electronic invoicing is creating confusion for businesses, according to experts.

The situation is compounded by differing interpretations on the use of electronic signatures.

European Union legislation which came into effect in January allows e-invoices to be used for VAT purposes.

But while the EU directive produced a single set of rules, individual governments may interpret and apply the rules differently.

Member states could introduce different requirements for invoices, for example, as rules governing what information must be included vary across Europe.

Governments also take different approaches to the use of electronic signatures, depending on the country.

The legislation was welcomed because it allowed invoices to be sent electronically.

Stefan Foryszewski, product development director at invoice network Open Business Exchange, explained that some countries had previously refused to accept them.

"But it has raised far greater levels of confusion. In order to ensure that our network could deal with invoices going to businesses in all member states, we had to hire an army of lawyers from each country to make sure we got the rules right," he said.

Fears over the potential for fraud have prompted some governments to insist that e-signatures accompany e-invoices. But the UK has adopted a more pragmatic approach, with HM Customs & Excise (HMCE) not insisting on it.

"If you use electronic data interchange to transmit invoices, there is no need for digital signatures," said Mike Gibbard, director at trading hub Burns e-Commerce Solutions.

But Stephen Lane, partner at law firm Masons, warned that HMCE is still going to be vigilant in ensuring that invoices are genuine and had not been subject to unauthorised changes.

"HMCE is very concerned about the potential for fraud with electronic invoices. It wants to see that the parties are authenticated and that invoices have not been intercepted or altered as part of a VAT scam," he explained.

Even having come to terms with variations in invoicing rules across Europe, potential pitfalls remain.

Companies also need to be wary of payment terms which they have agreed in contracts, according to Janet Chance, associate at law firm Eversheds.

"We frequently see contracts that stipulate 'payment to be made within 30 days of invoicing'. Often, these contracts ask for the invoice to be in 'writing'. Electronic invoices may fall foul of that," she said.

But while businesses may currently be wary of e-invoicing, they should be planning ahead to deal with the problems, according to Gibbard.

"E-invoicing plays a part in HMCE plans to introduce electronic VAT returns. Without the invoicing part, they would not have considered it," he said.

Customs officials last year told a parliamentary committee that electronic VAT payments could become compulsory for some firms within three years.