The traditional way to hide sales from HMRC is to take payment in cash and not put it through the books. Nowadays technology helps dishonest traders to hide sales by using electronic sales suppression (ESS) software. The sale is not recorded on the normal till record and the payment may also be diverted to a non-business bank account by manipulating the card-reader.

Last year HMRC raided 90 businesses involved in designing and marketing ESS software and as a result has a list of the names and addresses of businesses who bought that software. Users of ESS software may receive a letter from HMRC inviting a full disclosure of any undeclared sales and tax which should have been paid thereon.

Users will have 30 days to make the disclosure using the special online process for ESS declarations so there is not much time to mull-over what to do. If you receive a letter but have not deliberately hidden any of your sales you need to respond quickly to HMRC. If you do not respond within 30 days HMRC will either open a tax enquiry into your business or issue assessments for estimated amounts of unpaid tax. Interest will be due on any late paid tax plus penalties for:

late payment of tax;

inaccurate VAT, corporation tax or income tax returns;

failure to register for VAT, corporation tax or income tax; and

possession of ESS software.

Traders who have used ESS software are in serious trouble as HMRC view this as tax fraud which is a criminal offence, although in most cases HMRC will agree a civil settlement.

Ask us for advice if you receive a letter from HMRC about ESS.