The government has launched a call for evidence ‘Electronic Sale Suppression’ (ESS) to understand more about the exploitation of modern technology for the purposes of ESS, what the potential scale of tax evasion is, and how the electronic point of sale (EPOS) industry can help prevent it. 

ESS is where businesses or individuals use technology to artificially reduce their reported sales and corresponding tax liabilities by manipulating the electronic records of their sales data, either during or after the point of sale.

  • Individual transactions may be hidden completely or their value reduced.
  • Businesses may:
    • use illegitimate software and technology created specifically for the purposes of facilitating tax evasion.
    • deliberately misuse legitimate EPOS functions to suppress sales (such as misusing a till training mode, which automatically allows sales to be excluded from accounts). 

The consultation invites views from a wide group of stakeholders including individuals, businesses, tax professionals, EPOS providers, and anybody with knowledge or experience of the impact of ESS on UK tax compliance. It incorporates real life examples of ESS in practice including 14 cases where software allowed for EPOS till data to be remotely manipulated and sales deleted, without a trace, by the use of an associated mobile phone application.

The government has suggested two potential options for tackling ESS:

  • Exploring technological measures such as mandatory software or hardware for businesses which conforms to technical requirements that reduce the opportunity for ESS or
  • An encrypted, unalterable and complete transaction log containing details of every transaction and adjustment.

The consultation closes on 20 March 2019. It does not specifically reference Making VAT Digital, which is due to start in April 2019, but there are clear links here as EPOS systems will form the starting point for many businesses' digital records.

Summary of consultation questions:

Question 1: Are you aware of ESS being used to evade taxes in the UK?   

Question 2: Are you able to make any estimates of the scale of ESS within your business sector or more generally? For example, are you able to estimate the proportion of businesses you believe may be participating in ESS or the value of sales not properly recorded?

Question 3: Can you suggest any specific measures the government could consider to address ESS?  

Question 4: What do you see as the advantages of mandatory software or hardware for businesses which conforms to technical requirements that reduce the opportunity for ESS?

Question 5: What do you see as the disadvantages of mandatory software or hardware for businesses which conforms to technical requirements that reduce the opportunity for ESS?

Question 6: What do you see as the advantages of an encrypted, unalterable and complete transaction log containing details of every transaction and adjustment?

Question 7: What do you see as the disadvantages of an encrypted, unalterable and complete transaction log containing details of every transaction and adjustment?

Question 8: Would an unalterable transaction log be useful for wider business activities?

Question 9: What other technological solutions could help tackle ESS?   

Question 10: What challenges should the government take into account in changing its approach to ESS? 

Question 11: Is there a role for the public in tackling ESS? If so, what could this role be?   

Question 12: How could HMRC and the EPOS industry work together to support businesses and reduce opportunities for tax evasion?

Question 13: Please feel free to submit, alongside your return, any additional information that you feel would be useful to HMRC. 

Links to our guides:

Sales/turnover: tax compliance
A guide about when and how to include sales in your accounts

Making Tax Digital: VAT 
A guide setting out everything we know and you need to know about Making tax digital for VAT.

External link:

Call for evidence: Electronic Sales Suppression

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