HMRC targets suspected users of electronic sales suppression tools

HMRC has begun issuing letters to individuals and businesses suspected of electronic sales suppression (ESS), requiring action to ensure their tax affairs are correct. This initiative is based on data held by HMRC, which suggests that some businesses are evading tax by suppressing their sales.

Sales suppression can be achieved using technology that conceals or diminishes the value of individual transactions within a business’s electronic sales records. This manipulation can occur either at the point of sale or subsequently, ensuring that records appear accurate and complete. ESS tools are primarily used to reduce reported turnover, which results in lower tax liabilities while maintaining the appearance of compliant business records. 

In the letters, HMRC notifies recipients that this is their final opportunity to submit a complete, accurate, and honest disclosure. Failure to do so will result in HMRC calculating the presumed unreported tax and imposing penalties accordingly. 

Taxpayers that receive such letters should respond appropriately. If the information held by HMRC is incorrect and there are no under-reported sales, they should complete an online form to confirm a nil disclosure. However, if HMRC later discovers that a nil disclosure was inaccurate, or if the recipient does not respond to the letter, HMRC may investigate or raise assessments to collect the tax that it believes is owed.

As the use of ESS tools is likely to lead to the evasion of tax, HMRC may take action that results in criminal prosecution and/or penalties of up to 100% of the tax at stake.

If you receive such a letter, carefully managing the process of regularising your tax affairs can help reduce the risk of penalties and further action by HMRC. If you want to talk through your options or require assistance, please contact our specialists for a no-obligation discussion.