HMRC has launched a campaign of one-to-many letters given its increasing concern surrounding the electronic suppression of sales (ESS). The campaign targets businesses that might have unpaid taxes due to misuse of their till systems.
ESS allows a till system to hide or alter the value of individual transactions, while producing a credible audit trail. For example, only one out of every four sales might be recorded, resulting in lower reported turnover. Lower reported turnover means income tax or corporation tax is underreported, along with VAT.
One-to-many letter
The letter provides an opportunity for a business to get its tax affairs in order by making a voluntary disclosure of underreported sales:
- The different penalties that can be charged are explained. These can be reduced if full disclosure is made.
- The letter also explains what further action HMRC might take if a business avoids paying any tax it owes.
HMRC’s campaign is expected to run for at least a year. Even if your sales have been correctly reported, you still need to confirm this within 30 days of receiving a one-to-many letter.
Penalties
A new penalty has been introduced, along with the usual penalties for inaccuracies, for being in possession of an ESS tool:
This is defined as software or hardware which allows a business to hide or reduce the value of individual transactions on its electronic sales records. It includes using a till – or modifying a till – to suppress sales.
The initial penalty for possession of an ESS tool can be up to £1,000. A daily penalty of up to £75 a day is then charged if possession or access to the ESS tool continues.
A penalty can be charged for simply being in possession of an ESS tool, regardless of whether the tool is actually used to suppress sales. Possession also includes access to, or even trying to access, an ESS tool. HMRC’s guidance on ESS can be found here.