What is ESS?
Electronic Sales Suppression (ESS) is more widely known as till fraud. It is where a business manipulates their till systems to hide or reduce the true value or amount of sales but the data reported looks like a complete and accurate record. ESS is a form of tax fraud and individuals who make ESS systems; use or promote them are all considered to be involved in the fraud.
What is happening now?
HMRC are issuing letters to taxpayers they suspect of ESS as a final opportunity to make a complete, accurate and honest disclosure. If you receive a letter, this is a strong indication that HMRC have information and they will expect you to make a disclosure to reconcile any discrepancies already identified. To facilitate these disclosures HMRC have reopened their ESS disclosure facility which was previously used in early 2023.
HMRC are giving taxpayers only 30 days from the date of these letters being issued to log on to the dedicated disclosure service and make a full disclosure. If you make a false or incomplete disclosure, HMRC can charge penalties of up to 100%.
Throughout 2024, HMRC conducted unannounced visits of businesses across England and Scotland that they suspected of using ESS. On some occasions these visits were usually accompanied by the launch of a criminal investigation.
It is important to emphasise that taxpayers still have the ability to make voluntary disclosures, which is encouraged because HMRC’s penalties are less for voluntary ‘unprompted’ disclosures.
What happens if I ignore the letter?
HMRC have confirmed that if they do not receive a response to their letter within 30 days, they will take further action which could include:
- Visits
- Investigations and inspections of business records
- Issuing an assessment (this is where HMRC will calculate what they think the taxpayer owes and potentially charge penalties)
- Opening a criminal investigation
In more serious cases, or where there are other issues which require disclosure to HMRC, thought needs to be given to what other options for disclosure are available. This includes HMRC’s Code of Practice 9 (COP9) disclosure facility which is the only disclosure facility which offers immunity from criminal prosecution when a full disclosure is made.
Making a disclosure of tax fraud and/or deliberate behaviour is a specialised area and both HMRC and we would urge taxpayers to seek advise from experienced specialists in the field to ensure the most appropriate outcome.
If you would like to discuss the ESS disclosure facility or voluntary disclosures more generally, please contact Menzies Tax Disputes and Disclosures team:
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