On 31 May 2022 HMRC announced that a number of businesses had been visited and some arrests made following the introduction of new powers to combat the use of electronic sales suppression (ESS) systems.

Around 30 businesses, including including shops, takeaways and restaurants, were visited by HMRC on 18 May 2022, as part of a criminal investigation in relation to the alleged supply of ESS software.

ESS software

Some businesses make use of software that is created to assist tax evasion by deliberately excluding certain products or types of transaction from the tax audit trail. Other businesses deliberately misuse their electronic point of sale (EPOS) technology to reduce the sales figure, for example by using the training mode of an electronic till to key in sales that are then excluded from the records.

Sales processed through the till give the impression they have been recorded as normal. The end-of-day report may however be deliberately manipulated to reduce reported takings.

New powers

On 20 July 2021 the UK issued draft legislation and an explanatory note on new powers to deal with tax evasion through the use of electronic sales suppression (ESS). The draft legislation was based on information obtained from a call for evidence issued on 19 December 2018.

The measures were included in the Finance Bill 2021/22 and took effect from the date of Royal Assent to the Finance Act 2022 which was on 24 February 2022. The new legislative powers strengthened the ability of HMRC to deal with the problem by making it a criminal offence to possess, supply and promote ESS software or hardware.

Businesses that are involved in making, supplying or promoting ESS systems can now be subject to fines up to GBP 50,000 and a requirement to remove the ESS from their systems. In some cases, they may also be the subject of criminal investigations. Also, the businesses using these systems to understate sales and evade tax may be subject to fines.

Disclosure

HMRC has a disclosure facility through which anyone using, supplying, making or promoting ESS can report it. Making a disclosure could result in a reduction of financial penalties.