Businesses hiding sales to avoid tax is not breaking news and has been done for years; however, with the digital age have come new methods. While, in the past, traders would take cash to avoid putting sales through the books, businesses are now using electronic sales suppression (ESS) software. But what is ESS? And what is HMRC doing to tackle these dishonest traders?
Understanding The Repercussions Of Using ESS Software
Whether you have been contacted by HMRC regarding the use of ESS software or simply want to understand more about the most recent legislation, our short guide will run through the following:
- What Is ESS Software?
- How Has HMRC Handled The Use Of ESS?
- What Should You Do If You Receive A Letter?
- What Are The Consequences Of Using ESS Software?
What Is ESS Software?
Electronic sales suppression (ESS) software prevents a sale from being recorded through a usual till record. It can also manipulate a card reader into diverting payments into a non-business bank account. Together, this allows businesses to understate their turnover and, as a result, pay less tax.
How Has HMRC Handled The Use Of ESS?
To tackle dishonest traders using ESS, HMRC spent time last year raiding the businesses involved in designing, creating and marketing ESS software. Having now caught 90 businesses, HMRC has been able to gather a list of the businesses who have purchased this software, including their names and addresses. These users will be sent a letter from HMRC asking them to fully disclose any undeclared sales and tax that should have been paid.
What Should You Do If You Receive A Letter?
Those who receive a letter from HMRC will have 30 days to declare sales and tax using an online ESS declaration process. This means that if you haven’t deliberately hidden any of your sales, you must respond quickly to rectify the problem. Failing to respond within 30 days will mean that HMRC will either open a tax enquiry into your business or issue assessments for estimated amounts of unpaid tax.
What Are The Consequences Of Using ESS Software?
Along with adding interest onto any late paid tax, HMRC has also introduced penalties for:
- Late payment of tax
- Inaccurate VAT, corporation tax or income tax returns
- Failure to register for VAT, corporation tax or income tax
- Possession of ESS software
Any businesses found guilty of using ESS software will be in serious trouble, as HMRC will classify this as tax fraud, which is a criminal offence. However, in most cases, HMRC will agree on a civil settlement instead.
Need Advice? Contact Our Team Today
If you have received a letter from HMRC regarding ESS and are unsure what to do next, please do not hesitate to contact us. Our team are always more than happy to advise you on the following stages based on your circumstances.