Electronic sales suppression (ESS) is known to be in use in the hospitality sector and is a form of tax evasion where the business manipulates electronic sales records, either during or after the point of sale, to hide or reduce the value of individual transactions.
As EPoS systems have become more sophisticated, the techniques of artificially hiding or reducing the value of individual transactions have become more diverse. Some EPoS system manufacturers and software designers have told HMRC that businesses openly ask for ESS functionality to be built into their till systems.
HMRC said this concealed form of tax evasion reduces the recorded turnover of the business and, as a result, their tax liabilities while still providing what appears to be a credible set of records.
It added tax evasion not only results in a loss of money for public services but it also gives non-compliant businesses an unfair market advantage over their competitors who pay what they owe.
First announced in Spring Budget 2021, HMRC now has new powers to tackle ESS and penalise those who evade in this way. These powers came into effect in February 2022 and mean that HMRC can take stronger action against anyone found to be making, supplying or promoting ESS software and hardware, and businesses in possession of it.
HMRC has already begun to take action and, on 18 May 2022, about 30 businesses across nine counties, including several takeaways and restaurants, were visited in a co-ordinated day of action against ESS.
It resulted in two men and one woman being arrested on suspicion of fraud offences and cheating the revenue in Nottinghamshire, as part of a criminal investigation into the alleged supply of ESS software. The suspects have been released under investigation.