Guidance

Electronic sales suppression — CC/FS68

Published 16 November 2022

This factsheet tells you about electronic sales suppression (ESS). It explains what powers we can use to help us identify and tackle ESS. It also explains the penalties we may charge if you are involved in ESS.

You are involved in ESS if you made, supplied, or promoted an ESS tool. You are also involved in ESS if:

• you own an ESS tool
• have access to an ESS tool
• have tried to access an ESS tool

If you need help

If you have any health or personal circumstances that may make it difficult for you to deal with us, please tell the officer who has contacted you. We’ll help you in whatever way we can. For more information, go to www.gov.uk/get-help-hmrc-extra-support.

You can also ask someone else to deal with us on your behalf. For example, a professional adviser, friend or relative. However, we may still need to talk or write to you directly about some things. If we need to write to you, we’ll send a copy to the person you’ve asked us to deal with. If we need to talk to you, they can be with you when we do, if you prefer.

What is ESS

ESS is where a business uses a tool to either hide or reduce the value of individual transactions on its electronic sales records. We call this sales suppression. They do this either at, or after, the point of sale. Their records then appear to be correct and complete.

Businesses do this to reduce their turnover so that they pay less tax. They also do this to try to appear compliant.

What is an ESS tool

An ESS tool is a piece of software, computer code script or hardware. It allows a business to hide or reduce the value of individual transactions on its electronic sales records. This includes using and/or configuring a till, or point of sale (POS) system, in a way that suppresses sales.

You do not have to have used an ESS tool to supress sales or pay less tax for us to charge you a penalty for being involved in ESS.

Our information powers

The law gives HMRC ‘information powers’ that allow us to ask for certain information and/or documents. We use these powers to check a person’s, tax position. To do this, we issue an ‘information notice’. This is a document that legally requires a person to give us certain information and/or documents.

Schedule 14 to the Finance Act 2022 allows us to issue an information notice for ESS. This means we can ask for certain information that only applies to ESS. It allows us to issue a notice to a ‘relevant person’ for a ‘relevant purpose’.

Who is a ‘relevant person’

A ‘relevant person’ is any person who we think we might be able to charge a penalty for being involved in ESS. These penalties are explained below.

What is a ‘relevant purpose’

A ‘relevant purpose’ is the reason that we are asking for information about ESS and ESS Tools. The law allows us to do this in three types of situations. These are to help us:

• decide whether a relevant person has made, supplied, promoted, or possesses an ESS tool — we would be able to charge this person a penalty
• understand how an ESS tool works
• identify any other person who has made, supplied, promoted, or possesses the ESS tool

If we give you an information notice, you must give us the information and/or documents that we ask for.
If you do not, we can charge you penalties.

You can find out more about these penalties and information notices in our factsheets:

• CC/FS2, ‘Information notices’
• CC/FS23, ‘Third party information notices’
• CC/FS60, ‘Financial institution notice’

To find these factsheets online, go to www.gov.uk and search for ‘CC/FS2’, ‘CC/FS23’ or ‘CC/FS60’.

When we may charge you a penalty for being involved in ESS

We can charge you a penalty if you:

• are ‘in possession’ of an ESS tool
• made, supplied, or promoted an ESS tool

The tool does not need to have been used to suppress sales or evade tax for us to charge you a penalty.

Possession of an ESS tool

Being ‘in possession’ of an ESS tool includes:

• owning an ESS tool
• having access to an ESS tool
• trying to access an ESS tool

When we first suspect that you are ‘in possession’ of an ESS tool, we’ll write to tell you to remove it or stop using it. We’ll also tell you that you need to ‘satisfy us’ that the tool has been removed. This means you must give us all of the information we ask you for to show that you are no longer ‘in possession’ of the tool. If you do not satisfy us that the tool has been removed, we’ll charge you a fixed penalty.

If we’ve charged you an ESS penalty in the past 5 years, we will immediately charge you the fixed penalty. We will not write to you before we charge it. We will also tell you to remove the tool or stop using it.

After we charge you the fixed penalty, we’ll also charge you daily penalties. We will do this until you ‘satisfy us’ that you are no longer in possession of the ESS tool.

If you have to pay more tax because of your involvement with ESS, we may charge you other penalties. This can include penalties for filing inaccurate documents or returns, or for failing to notify us that you must pay a specific tax.

You can find out more about penalties for not complying your tax obligations in our factsheets:

• CC/FS7a, ‘Penalties for inaccuracies in returns and documents’
• CC/FS11, ‘Penalties for failure to notify’

To find these factsheets online, go to www.gov.uk and search for ‘CC/FS7a’ or ‘CC/FS11’.

Making, supplying or promoting an ESS tool

We may charge you a penalty when you:

• make an ESS tool
• modify a non-ESS tool so that it becomes an ESS tool
• supply an ESS tool to another person
• promote an ESS tool — this is when you give information to another person so that they are able to use an ESS tool

We will charge you a penalty that is a percentage of the maximum penalty we can charge. The percentage we charge will be based on the complexity of the ESS tool, and on how much help you give us during our compliance check.

The maximum penalty we can charge is £50,000. This is for each time someone makes, supplies, or promotes a specific ESS tool.

When we will not charge you a penalty

We will not charge you a penalty:

• from the time you satisfy us that you are no longer in possession of an ESS tool
• if you have supplied an ESS tool, but were not aware that that it was an ESS tool
• if you have been convicted of a criminal offence for your involvement in ESS

How we work out the amount of a penalty

We work out the penalties for being in possession of an ESS tool differently from the penalties for making, supplying or promoting an ESS tool.

Penalty for being in possession of an ESS tool

We can charge up to £1000 for the initial fixed penalty. We will charge a penalty according to the seriousness of this type of tax evasion and how well our request to remove the tool is met.

We can also charge daily penalties of up to £75 per day. The officer who writes to you will decide how much the daily rate will be each time they charge you the penalties.

If we have already charged you an ESS penalty in the past 5 years, it is our policy to charge you the full £1000 fixed penalty. After we charge the fixed £1000 penalty, the daily penalty rate will normally be £75 per day.

Penalty for making, supplying, or promoting an ESS tool

We can charge you a penalty of up to a maximum of £50,000. This maximum penalty applies to each ESS tool you are involved with. It also applies to each time you have made, supplied, or promoted an ESS tool.

We will charge a percentage of the maximum penalty amount. This percentage will be based on the:

• different types of ESS tools that exist — this is explained at point 1 below
• type of disclosure you make — this is explained at point 2 below
• ‘quality of disclosure’ you make — this is explained at point 4 below

There are 6 stages we use to work out the final penalty percentage. Each stage is explained below.

1 Deciding the nature of the ESS tool

When we look at an ESS tool, we will base the penalty on how complex the tool is. This includes how the tool is operated, as well as how easy it is to see the suppressed sales data.

Low complexity

This category applies to ESS tools that are present in the point of sale/electronic cash register system, or that we can identify through documentation or instructions.

The details of the original transactions will still be held in the system. It will be straightforward for us to see which records have been suppressed, and how the tool has manipulated the data.

The maximum penalty for this category is 40% of the maximum £50,000 penalty.

Medium complexity

This category applies to ESS tools that are present in the point of sale/electronic cash register system, but that we cannot identify through documentation or instructions.

It also applies to tools that are not present in the point of sale/electronic cash register system but are still part of your IT infrastructure, hardware, software or systems.

The details of the original transactions may not still be held in the system. However, it will be straightforward for us to see how the tool has manipulated the data.

The maximum penalty for this category is 80% of the maximum £50,000 penalty.

High complexity

This category applies to tools that are not present in the point of sale/electronic cash register system and are operated remotely. This might include running the tool via the internet from another location, or from a separate device. For example, a USB stick or temporary connection to a computer or mobile device.

The details of the original transactions may not still be held in the system. It will not be straightforward for us to see how the tool has manipulated the data.

The maximum penalty for this category is 100% of the maximum £50,000 penalty.

2 Deciding whether your disclosure was ‘unprompted’ or ‘prompted’

This determines the minimum penalty percentage that we will charge.

If you tell us about your involvement in ESS before you think that we’re about to find out about it, we call this an ‘unprompted disclosure’. If you tell us about it at any other time, we call it a ‘prompted disclosure’. Once we’ve started a check, we may still decide that a disclosure is unprompted. We would only do this if:

• it’s about an ESS tool that’s not related to the one we are checking

• you had no reason to believe that we could have found out about the ESS tool during our check

The minimum penalty we’ll charge for an unprompted disclosure is lower than the minimum penalty for a prompted one.

3 Deciding the range that the penalty falls into

The first two stages above mean that the penalty percentage falls into one of 6 ranges.

The range depends on the nature of the ESS tool and whether you made a ‘prompted’ or ‘unprompted’ disclosure. This table shows the 6 penalty ranges.

Nature of ESS tool	Unprompted disclosure	Prompted disclosure
Low complexity	10% to 40%	20% to 40%
Medium complexity	30% to 80%	45% to 80%
High complexity	50% to 100%	70% to 100%

4 Working out the reductions for the ‘quality of disclosure’

We can reduce the amount of any penalty we charge you depending on our view of how much assistance you gave us. We refer to this assistance as the ‘quality of disclosure’ or as ‘telling, helping and giving’.

Examples of how you can make a disclosure include:

• telling us the full details of your involvement in ESS
• telling us how the ESS tool works
• helping us identify who else is involved with the making, supply, or promotion of the ESS tool
• giving us access to lists of users, suppliers, or promoters

We’ll reduce the penalty by the maximum amount possible if you tell us everything you can about your involvement in ESS. We call this the ‘maximum reduction’.

If you delay in making a disclosure, we may still reduce your penalty, but it will be a smaller reduction. If we do not need any extra assistance from you, we’ll give you some reduction for ‘telling, helping and giving’.

The reduction we give depends on how much assistance you give us. For:

• telling we give up to 30% of the maximum reduction
• helping we give up to 40% of the maximum reduction
• giving access to records we give up to 30% of the maximum reduction

We’ll only make a small reduction, or no reduction, for the quality of disclosure if you:

• delay giving us the information we need
• give us misleading answers
• make it difficult for us to complete our check

When we work out the quality of your disclosure, we’ll also consider how long it’s taken you to make it. If it’s taken you a long time (such as 3 years or more) to correct or disclose what is wrong, we’ll usually restrict the maximum reduction we give for the quality of disclosure. We’ll restrict the maximum reduction to 10 percentage points less than the maximum reduction. This means you will not get the lowest penalty percentage rate that’s normally available. You can see how this works in the example below.

5 Working out the penalty percentage rate

The penalty percentage rate is determined by the penalty range and the reduction for the quality of disclosure.

Example

We found a low complexity tool and identified the supplier. The supplier had not told us about their involvement in ESS before we contacted them. When we told them about the tool, they agreed they’d supplied it, and told us how it worked and who they supplied it to. This was a prompted disclosure.

They took 4 years to make this disclosure to us. This means they took 4 years to tell us that they had supplied an ESS tool.

The penalty range for a low complexity tool with a prompted disclosure is 10% to 40% of the maximum penalty of £50,000. But, because the supplier took 4 years to make a disclosure, the minimum penalty charged will be no lower than 20%.

The reduction for quality of disclosure (telling, helping and giving) was 80%.

Steps	Calculation example
To work out the penalty percentage rate, we first work out the difference between the minimum and maximum penalty percentages. We call this the maximum reduction.	40% maximum minus 10% minimum = maximum reduction of 30%
We then restrict the maximum reduction by 10% because it took 4 years for a disclosure to be made. We call this the restricted maximum reduction.	30% maximum reduction is reduced by 10% The restricted maximum reduction is now 20%
We then apply a ‘quality of disclosure’ reduction to the restricted maximum reduction to get the percentage reduction.	80% multiplied by 20% = 16%
We then take off the percentage reduction from the maximum penalty percentage we can charge.	40% maximum minus 16% reduction = 24%
This gives us the penalty percentage rate.	24%

6 Working out the amount of the penalty

To work out the amount of the penalty, we multiply the maximum penalty by the penalty percentage rate. Using the example above, if there were no other reductions, the penalty would be £12,000 (£50,000 × 24% = £12,000).

Special circumstances

When we charge either type of ESS penalty, we’ll follow the steps shown above. This will take into account the relevant circumstances of most ESS cases. If we think there are any circumstances that need us to charge a lower penalty amount than we would usually charge, we will reduce the penalty. We call this a ‘special reduction’ and it can only apply in exceptional circumstances.

How we tell you about a penalty

We’ll write to you to tell you how much the penalty is and how we’ve worked it out. If there’s anything about the penalty that you do not agree with, or if you have any information that you think we have not already looked at, you should tell us straightaway.

Once we have looked at any information you have given us, we’ll then send you a penalty assessment notice showing the amount that we are charging you.

If you disagree

If there’s something that you do not agree with, please tell us.

If we make a decision that you can appeal against, we’ll write to you about the decision and tell you what to do if you disagree. You’ll usually have 3 ways to tell us if you disagree. Within 30 days, you can:

• send new information to the officer dealing with the check and ask them to look at it
• have your case reviewed by an HMRC officer who has not been involved in the matter
• arrange for an independent tribunal to hear your appeal and decide the matter

Your rights if we’re considering penalties

The European Convention on Human Rights gives you certain rights when we’re considering whether to charge you penalties for making, supplying or promoting an ESS tool. These rights are that:

• if we ask you any questions to help us decide whether to charge you a penalty, you do not have to answer them
• you can decide how much help to give us when we’re considering penalties
• if you decide to answer our questions, you may want to get advice from a professional adviser — particularly if you do not already have one
• if you disagree with us about the penalties we charge you, you can appeal
• you can apply for funded legal assistance for dealing with any appeal against certain penalties
• you’re entitled to have the matter of penalties dealt with without unreasonable delay

You can find full details about these rights in factsheet CC/FS9, ‘The Human Rights Act and penalties’. Go to www.gov.uk and search for ‘CC/FS9’.

What you can do to avoid a penalty in future

You can avoid a penalty by:

• not installing an ESS tool to any device you own at any time
• not changing or configuring settings within your electronic point of sale (EPOS) system that creates or activates an ESS tool
• not accessing, or attempting to access, an ESS tool that is held on a device owned by someone else
• not using functions available on your EPOS system to reduce your sales unless there is a legitimate reason to do so

You should also keep full and accurate business records. This means you can show us what we need to see if we ask for it and help us carry out any compliance checks more quickly.

More information

This factsheet is one of a series. For the full list, go to www.gov.uk and search for ‘Compliance checks factsheets’.

If you are not happy with our service

Tell the person or office you’ve been dealing with. They’ll try to put things right. If you are still not happy, they’ll tell you how to make a formal complaint.

Our privacy notice

Our privacy notice sets out the standards that you can expect from us when we ask for information or hold information about you. For more information, go to www.gov.uk and search for ‘HMRC Privacy Notice’.