What is Electron Sales Suppression (ESS)? How Can ESS Hinder You?

ESS has been identified to be deliberately used to manipulate and alter tax audits of sales transactions within a business…

ESS software as mentioned above can be used to manipulate sales transactions in a way that falsifies a businesses tax return. This reduces the overall cost that a business will have the pay in tax’s each year all while appearing to be recording a credible, and compliant audit trail to elude suspicion. Traditionally, cash-in-hand was the preferred method to swindle tax’s, however, in recent years technology has advanced.

Technology has made many businesses lives easier simultaneously reducing wasted time, and saving money thanks to EPoS systems and integrated software. Although these development make our lives easier the more things are recorded, stored, and managed by technology; the harder it is to evade paying tax’s on what these EPoS devices record. Thus, creating the demand for this ESS software to essentially have the best of both worlds.

Legislation is coming into affect to ban the supplying, distribution, and possession of the ESS software acting as a warning to all that may want to try their luck with wanting to save a few pounds here and there on their tax returns. If that wasn’t scare mongering enough HM Revenue and Customs (HMRC) are moving forward with getting specific powers to gain access to information of individuals that may be supplying ESS software, and hardware. The ESS software developers’ source code will be analysed to obtain details amongst structural data within the EPoS System itself.

HMRC has issued that individuals in possession of ESS software can be liable to pay a fixed penalty of up to £1000 as an initial payment. Continuation of ESS software can see individuals paying £75 daily in consequence – capped at £50,000. Although these are not small figures HMRC have given individuals 30 days to rectify their wrong doings, and in return no penalties will be given. The level of proof needed to demonstrate, or better yet prove to HMRC that the individual in question has rectified the situation will be assessed by HMRC on a case-by-case basis.

Further violations for individuals that abused the system with ESS software can lead to a hefty bill to be paid. Individuals that have had prior violations within the last 5 years in relation to ESS software will be fully liable to pay all penalties given with no means to right their wrongs as detailed above. However, there is another option available; individuals that have been prosecute by the HMRC for ESS violations , and therefore have been committed a criminal offence will not be liable to paying the violation penalties.

New powers to effectively combat the possession, supply, and promotion of ESS software was in effect as of February 2022. The Finance Act (2022) details the powers given to tackle and address the present violations of EPoS systems being fitted with ESS software that manipulates a businesses true yearly revenue.

On 18 May 2022, a total of 30 businesses have been visited in line with the compliance of the Finance Act (2022). These businesses range shops, takeaways, and restaurants. Subsequently, 2 men and a woman have been arrested in Nottinghamshire as part of a criminal investigation into the alleged supply of ESS software.

As above, the penalties can be forfeit given the correct evidence being supplied amongst all illegal violations of ESS software halted. Otherwise, a successful prosecution brought from the HMRC which would result in a criminal charge being brought against you, thus making violation penalties void. However, there is an alternative; Individuals that are using, promoting, or supplying ESS are to submit a report via the HMRC’s disclosure facility which in effect can lead to a reduction in penalties.