This is a freeview 'At a glance' guide to Electronic Sales Suppression (ESS) tax.

Finance Act 2022 includes legislation covering HMRC's new powers to tackle electronic sales suppression. It follows their Earlier consultation. The rules take effect from 24 February 2022.

Electronic Sales Suppression (ESS) is the practice of deliberately manipulating electronic sales records to hide the value of individual transactions. This practice artificially reduces the recorded turnover of the business evading tax while producing a credible audit trail.

The measures are aimed at developers, promoters, suppliers and users of ESS tools and makes them liable for penalties.

An ESS tool is a physical device, software, computer code or other digital data, as well as any other thing which:

  • Is capable of suppressing (falsifying, manipulating, hiding or destroying) relevant electronic sales records (tax records that require retention under the legislation and are recorded by an electronic point of sale system).
  • It is reasonable to assume one of the main functions of the tool is to suppress relevant electronic sales records.

Penalties of up to £50,000 (as an HMRC officer considers appropriate) can be charged to:

  • Makers of ESS tools and those that modify other tools to become ESS tools.
  • Persons who supply ESS tools to other persons.
  • Promoters of ESS tools for each time they promote the tool.

Penalties of up to £1,000 can be charged if:

  • A person possesses, has obtained or has access to an ESS tool and;
    • HMRC has notified that person they have reason to believe they have access to an ESS tool and that person has not satisfied the HMRC officer that they are not (or are no longer) in possession of an ESS tool within 30 days, or;
    • The person has been assessed to an ESS penalty within five years of the day on which HMRC has reason to believe that the person has access to an ESS tool.

Further daily penalties of up to £75 per day (up to a total of £50,000) can be charged where possession or access to the tool continues.

  • There is a 30 day grace period (from the date of receiving a notice from HMRC) and penalties are not due if the person satisfies HMRC that they were unaware that the tool was an ESS tool or remove the tool within that period. HMRC have the discretion to reduce penalties in special circumstances. 
  • Penalties are due within 30 days of notification.
  • Appeals can be made against the decision to issue penalties and the amount of any penalties raised within 30 days of penalty notification. Penalties can be appealed to the tribunal.

Useful guides on this topic

How to appeal a tax penalty
What are the steps in making an appeal? What should your appeal cover? What does recent case law say on this topic?

External Links

Policy paper: Powers to tackle electronic sales suppression

Finance Act 2022 Schedule 14

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