HMRC has announced a new tax disclosure opportunity – but business owners who are using Electronic Sales Suppression (ESS) software on their till systems only have until 5 January 2023 to decide to come clean under this opportunity. However, the reporting deadline after registration has been extended.
Why now?
ESS involves manipulating software in electronic tills (e.g. in bars and restaurants) so that they record less sales than they should. This disclosure opportunity was launched on the back of a global operation, which in the UK has led to the arrest of five people behind certain ESS software. As part of the operation, HMRC says it has identified thousands of potential users of ESS software and is expected to open enquiries and investigate any suspected users. Anyone who has used ESS software will be in a much better position if they come forward voluntarily now, rather than waiting for HMRC to come knocking.
The HMRC announcement was made on 8 December 2022, and the disclosure opportunity is only open for registration until 5 January 2023. Any disclosure must then be made by 9 April 2023. Given the Christmas and New Year period, this leaves very little time for taxpayers and their advisers to register for the disclosure opportunity.
In Finance Act 2022, HMRC was given powers to obtain details of those involved in the ESS supply chain and traders suspected of using ESS tools. This legislation provides for significant penalties to be charged to those involved in promoting and supplying ESS software. Existing legislation empowers HMRC to assess tax for up to 20 years on undeclared sales for businesses using ESS software in addition to imposing considerable tax-geared penalties: it is expected that HMRC will use its full powers against those businesses’ owners who do not put things right voluntarily.
Is this the best route to put things right?
There are other existing tax disclosure routes, and these may be more appropriate and beneficial - for example, disclosing under Code of Practice 9 (the Contractual Disclosure Facility (CDF)). The CDF is most appropriate where the taxpayer’s behaviour is likely to be considered as ‘deliberate’ or fraudulent by HMRC. It offers a longer timescale for preparing the disclosure and, if accepted, brings protection from criminal prosecution for tax offences.
Help from BDO
If you have misused your till system to reduce sales and your tax bill (recently or in past years), immediate consideration should be given to approaching HMRC voluntarily to rectify the issue.
Our Tax Dispute Resolution team can clarify the options available to you to put things right, and explain the likely costs. For an initial no obligation discussion, please contact us urgently on 0800 0113 451.
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