What penalties apply for till tampering or Electronic Sales Suppression (ESS)?
This is a freeview 'At a glance' guide to Electronic Sales Suppression (ESS) penalties.
Finance Act 2022 included legislation covering HMRC's new powers to tackle electronic sales suppression. It follows their Earlier consultation. The rules took effect from 24 February 2022.
Electronic Sales Suppression (ESS), also known as till fraud or till manipulation, is the practice of deliberately manipulating electronic sales records to hide the value of individual transactions. This practice artificially reduces the recorded turnover of the business evading tax while producing a credible audit trail.
The measures are aimed at developers, promoters, suppliers and users of ESS tools and makes them liable for penalties.
An ESS tool is a physical device, software, computer code or other digital data, as well as any other thing which:
- Is capable of suppressing (falsifying, manipulating, hiding or destroying) relevant electronic sales records (tax records that require retention under the legislation and are recorded by an electronic point of sale system).
- It is reasonable to assume one of the main functions of the tool is to suppress relevant electronic sales records.
Penalties of up to £50,000 per tool (by way of a percentage, as an HMRC officer considers appropriate) can be charged to:
- Makers of ESS tools and those that modify other tools to become ESS tools.
- Persons who supply ESS tools to other persons.
- Promoters of ESS tools for each time they promote the tool.
The amount charged will depend on how complex the tool is, whether the disclosure was prompted or unprompted, the quality of the disclosure and whether there are any special circumstances to take into account.
Penalties of up to £1,000 can be charged if:
- A person possesses, has obtained or has access to an ESS tool and;
- HMRC has notified that person they have reason to believe they have access to an ESS tool and that person has not satisfied the HMRC officer that they are not (or are no longer) in possession of an ESS tool within 30 days, or;
- The person has been assessed to an ESS penalty within five years of the day on which HMRC has reason to believe that the person has access to an ESS tool. In this case the full £1,000 fixed penalty will be charged.
Further daily penalties of up to £75 per day (up to a total of £50,000) can be charged where possession or access to the tool continues.
- There is a 30 day grace period (from the date of receiving a notice from HMRC) and penalties are not due if the person satisfies HMRC that they were unaware that the tool was an ESS tool or they remove the tool within that period. HMRC have the discretion to reduce penalties in special circumstances. Penalties are not charged if the person has been convicted of a criminal offence for their involvement in ESS.
- Penalties are due within 30 days of notification.
- Appeals can be made against both the decision to issue penalties and the amount of any penalties raised. Appeals must be made within 30 days of the penalty notification. Penalties can be appealed to the tribunal.
It is proposed that from 4 March 2024, interest will be charged on the late payment of ESS penalties. HMRC launched a technical consultation on the draft regulations implementing this in October 2023. The consultation closed on 24 November 2023.
There was a window of opportunity between 6 January 2023 and 9 April 2023 (previously 28 February) to make a voluntary disclosure to HMRC if you used till systems to reduce your tax bill.
On 10 April 2023, HMRC updated their guidance to note that the online form could continue to be used to make a disclosure after 9 April 2023. This coincided with HMRC beginning to issue one-to-many campaign letters to suspected ESS users from 11 April 2023. See Electronic Sales Suppression one-to-many letters.
Useful guides on this topic
How to appeal a tax penalty
What are the steps in making an appeal? What should your appeal cover? What does recent case law say on this topic?