HMRC sets its sights on hidden electronic sales

It wasn’t that long ago that HMRC was paying particular attention to businesses understating large cash sales. Now, the decline of cash, especially since Covid-19, has led to a proliferation of software used to suppress electronic sales records.

An electronic sales suppression (ESS) tool manipulates electronic sales records to hide individual transactions, whilst producing a credible audit trail. For example, only one out of every four sales might be recorded, resulting in lower reported turnover.

Penalties, taxes and interest

A penalty can be charged for simply being in possession of an ESS tool, regardless of whether it is actually used to suppress sales. Possession doesn’t just mean owning an ESS tool, as it also includes having access to, or even trying to access, an ESS tool.

For possession of an ESS tool, the initial penalty can be up to £1,000. A penalty of up to £75 a day will then be charged if possession or access to the ESS tool continues. The daily penalty is subject to a £50,000 maximum.

  • HMRC takes a much harsher approach if a similar penalty has already been charged.
  • The initial penalty will not be charged if – within 30 days of receiving the penalty notice ­– a taxpayer can satisfy HMRC that they are no longer in possession of the ESS tool.
  • Similarly, the daily penalty ceases once HMRC is satisfied the taxpayer is no longer in possession of the ESS tool.


And of course, any VAT, income tax or corporation tax avoided will be payable, along with the appropriate interest and penalties.

Typically, card payments for missing sales are routed through an offshore bank account, so it will be difficult to argue such sales suppression is not deliberate and concealed.

Clearly any software designed to facilitate the under reporting of sales is essentially a tax evasion tool as well and should always be avoided.

HMRC guidance on ESS can be found here.