ESS – Enterprise boldly going?

11 January 2019

Just before Christmas HMRC launched a call for evidence about Electronic Sales Suppression. As with any such modern-day phenomenon, it is known by its acronym ESS.

It may be my age, or the kind of clients that I deal with, but I’m pretty sure that most of them wouldn’t have the first idea of how to monkey with their Electronic Point of Sale (EPOS) systems. However, it seems from HMRC’s call for evidence that this has been picked up as a growing trend by HMRC investigators. Who knew?

The call for evidence includes examples of what investigators have found, largely arising from software suppliers or intermediaries being in cahoots with the miscreant retailers. One example highlighted an EPOS system that could be altered using an App, allowing sales transactions to be removed completely and thus never appearing on the audit trail. 14 cases of use of this system were discovered, resulting in some criminal prosecutions and the recovery of £1.3m in tax.

The above example and others can be found at the call for evidence here. The consultation asks 13 questions, ranging from ones about basic awareness of ESS, via a hint of big brother and mandatory systems, to whether or not there are other technological solutions. If you want to join in the fun, the consultation closes on 20 March 2019.

I wonder with increasing reports of the failing High Street whether retailers will be tempted into taking drastic actions such as this to retain more cash from their sales? Equally, if this is not an uncommon occurrence, does the practice add to the reports of retail under-achievement?

ESS seems to rely on some degree of collusion between the software provider and the retailer – the call for evidence points the finger squarely at programmers – ‘In recent years, it has become apparent that some software developers are developing EPOS systems that deliberately suppress sales in order to facilitate tax evasion.’ Is this part of a sophisticated black economy, with errant retailers scouring the dark web for EPOS systems?!

Of course, it may not only be the proprietor of a business who is perpetrating such acts and, if a business owner is highly reliant on a staff member to deal with IT matters and that individual has a close relationship with IT suppliers, there is another loser alongside HMRC.

Tax evasion is a serious matter that can, as noted above, give rise to grave consequences. If you become aware of this or want to own up to past indiscretions and want an independent view on the best way of approaching the authorities, contact me or your local UHY tax adviser.