HMRC is giving businesses and individuals involved in using or supplying Electronic Sales Suppression tools a time-limited opportunity to make voluntary disclosures – between 6 January and 28 February 2023 – in return for lower penalties.

Counteracting ESS powers
New penalties came into force from 24 February 2022 in relation to Electronic Sales Suppression (“ESS”). Where a person possesses an ESS tool there is an initial penalty of up to £1,000 per tool, plus potential daily penalties of up to £75 per day – up to a maximum of £50,000 (per tool). Where a person makes; supplies; or promotes an ESS tool a penalty can be charged of up to £50,000 per tool. These penalties are lower in cases of the lesser complex tools. All the ESS penalties can be reduced by making high-quality disclosures (with extra reductions for voluntary disclosures).
Of course, if an ESS tool has been used to reduce profits or turnover disclosed to HMRC then there could also be additional tax to pay (e.g. Income Tax; Corporation Tax; VAT) and further tax geared penalties would also be chargeable on that additional tax. Additionally, HMRC could choose to prosecute in such cases.

Disclosure Opportunity
HMRC now intend investigating Electronic Sales Suppression seriously. But the taxman is also giving businesses the opportunity to reduce their penalties by making voluntary disclosures. This initial Tax Disclosure Campaign requires disclosures to be made between 6 January and 28 February 2023. Such unprompted disclosures qualify for lower penalties than cases discovered following an HMRC investigation. HMRC are also requesting that businesses register their intention to disclose in advance of the opportunity window. HMRC has produced an online form that businesses can use to give advance notice that they will be making a disclosure. If the form is submitted on or before 5 January 2023, HMRC will contact the person submitting it to explain how to make the disclosure.

What does it mean for me?
If you are in one of HMRC’s perceived high risk sectors (i.e. small independent retailers; takeaways; and the hospitality sector) then in any Tax Enquiry you can expect to have any electronic sales records examined with particular thoroughness and vigilance. Indeed, the days are already long gone where Tax Inspectors would accept all entries in a computerised system without querying the underlying audit trail. These days HMRC Tax Investigators often have a thorough working knowledge of electronic point-of-sale software, and frequently deploy specialist interrogation software when examining those records.

If you have been involved in the supply or use of Electronic Sales Suppression software (whatever your business sector) you should consider making a disclosure now. As with all disclosures you will benefit enormously from specialist help: particularly as HMRC will not be confining their interests to the ESS tool alone: but will be seeking to broaden the investigation into the taxation of any suppressed profits (along with further penalties thereon).

How Could Lynam Tax Enquiry Experts Help Me?
We have decades of extensive practical experience in managing Tax Disclosures and Tax Fraud Investigations. We have handled a number of cases involving Electronic Sales Suppression. If you have irregularities in your tax affairs, we can advise you on your best course of action. If appropriate, we will help you with any disclosure. We can help you avoid prosecution and help get you the best possible outcome for yourself; your business; and your family: including obtaining the lowest possible penalties.

*For a free, private, no obligation consultation, call
Paul Lynam: 0845 643 9997
Andrew Nutbrown: 07718 778710