HMRC to Combat Electronic Sales Suppression

HMRC has been consulting with industry bodies, the tax professions, and the electronics industry regarding its concern about Electronic Sales Suppression – in order to come up with some plans to combat this growing form of tax evasion.

Electronic sales suppression (ESS) occurs when businesses manipulate electronic sales records, during or after the electronic point of sale (EPOS), in order to hide or reduce the value of individual transactions. This artificially reduces the recorded turnover and corresponding tax liabilities: whilst at the same time covering the tracks by providing a seemingly credible and compliant audit trail.

The taxman believes that ESS is a growing area of tax evasion: especially given the increasing use of sophisticated EPOS systems, and the increasing familiarity of those systems by the business users. Electronic sales suppression is believed to be particularly prevalent in small independent retailers; takeaways; and the hospitality sector. It seems that some businesses have explicitly asked EPOS providers, and software developers, to include suppression functionality in their till systems – that they’ve asked for the software to be designed to enable them to fiddle their tax!

HM Revenue and Customs are considering a number of options to tackle the problem, including: mandatory HMRC-approved software and/or EPOS systems; cloud-based software to prevent local alteration of sales data; and mandatory fiscal tills (i.e. systems that provide transaction-level data direct to HMRC).

What does this mean to 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.

How Could Lynam Tax Enquiry Experts Help Me?
We have decades of extensive practical experience in managing Tax Disclosures and Tax Fraud Investigations. 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. If you are already under criminal investigation, we can assist in the preparation of the defence case. We can help get the best possible outcome for you, your business and your family.

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