Continuing their current campaign of one-to-many letters, HMRC have begun issuing another, this time concerned with Electronic Sales Suppression (ESS).
Suppressing sales is tax fraud and it is a global problem, leading many countries to create so-called Fiscal till solutions, but not so the UK.
HMRC is rightly concerned about the use of till systems that hide or alter the value of individual transactions in an electronic sale system. They distort a business' income whilst generating what seems to be plausible evidence of proper reporting. This impacts Income Tax/Corporation Tax and VAT.
The letters began to be issued on 3 June 2024. They allow voluntary disclosure of undeclared sales. The letter sets out the penalties applicable and further action that may follow if a business deliberately suppresses its income.
In certain circumstances, where deliberate behaviour or fraud is suspected, the best approach may be the Contractual Disclosure Facility (CDF). This route, also known as Code of Practice 9, can protect a taxpayer from criminal prosecution provided they make a full, open and honest disclosure of all deliberate behaviour and HMRC accepts them into COP9. Here, the deliberate behaviour may stretch beyond ESS and all must be reported. The online solution suggested in the letter does not afford this protection.
Where a business receives one of these letters but has not suppressed income it should email HMRC accordingly.
It is important not to overlook situations where it is necessary to make a Suspicious Activity Report (SAR) to the National Crime Agency under the Money Laundering and Terrorist Financing regime.
It is anticipated the campaign will run for at least a year.
Useful guides on this topic
Is a Fiscal Till solution the way to prevent ESS?
Over 30 countries have created and implemented so-called 'Fiscal Till Systems' to crack down on tax fraud by Electronic Suppression of Sales (ESS), but the UK shows no sign of following suit. Is the slow-burning rollout of Making Tax Digital into a direct tax to blame?
Penalties: Electronic Sales Suppression
What penalties apply for till tampering or Electronic Sales Suppression (ESS)?
Electronic Sales Suppression one-to-many letters
HMRC's April 2023, one-to-many, letter campaign targets businesses using Electronic Sales Suppression (ESS) tools, such as software, to deliberately manipulate electronic sales records and hide the value of individual transactions.
Making a tax disclosure (Digital Disclosure Service)
A practical guide to making a tax disclosure using HMRC's online system.
Contractual Disclosure Facility (CDF)
What is HMRC's Contractual Disclosure Facility (CDF)? How does it work? What must taxpayers do under the CDF?
Economic Crime and Corporate Transparency & Companies House: Update 2023
What is the Economic Crime and Corporate Transparency Bill? What new reforms will apply to Companies House and Partnerships? What data needs to be supplied to Companies House in respect of accountant's clients?
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