HM Revenue & Customs (HMRC) has launched a letter initiative to urge businesses that have misused their cash register systems, called electronic sales suppression, to rectify their tax affairs. We anticipate that this campaign to persist for at least the upcoming year.
Issuing these letters is a crucial aspect of the HM Revenue & Customs (HMRC) “One to Many” campaign. Over the next year or longer, HMRC will direct these letters to businesses specifically targeted for further scrutiny. This campaign’s primary purpose is to allow these businesses to resolve their tax-related concerns by disclosing any unreported sales.
Businesses that have potentially mishandled their cash registers and consequently evaded proper tax payment will receive correspondence from HM Revenue & Customs (HMRC). These letters present a chance for these businesses to rectify their tax matters. In the paragraphs below, we provide further advice and guidance regarding these letters and instructions for those who receive them.
According to HMRC, they possess evidence indicating that certain businesses employ cash register systems that manipulate or diminish the recorded value of individual transactions in their electronic sales records. These systems result in a decrease in the business’s reported turnover or sales. Consequently, this incurs reduced tax obligations while maintaining the appearance of credible and compliant sales records and audit trails. Carrying out such activity is called electronic sales suppression (ESS), also known as the deliberate manipulation of sales records.
What do I do if I receive a letter?
If you happen to receive a letter, it is crucial not to disregard it.
Regardless of whether you have any unreported sales or income to disclose, it is crucial to promptly reply to HM Revenue & Customs (HMRC) by the specified date mentioned in the letter, typically within 30 days of the letter’s issue.
HMRC has contacted you because they possess information suggesting that you might have utilised your cash register system in a manner that reduces your tax obligations. It is vital because the misuse of such a system can lead to insufficient payment of taxes, including income tax, VAT, or corporation tax. HMRC encourages you to use this opportunity to rectify your tax affairs by making a voluntary disclosure if you have manipulated your cash register system to lower your business’s recorded turnover.
It is advisable to verify that you have accurately recorded and declared all your sales while ensuring that the till system is not being employed or participating in the concealment or decrease of the sales value. Additionally, it is essential to confirm that any potential electronic sales suppression that you neither possess nor have access to any tools related to electronic sales suppression.
The letter includes an HMRC Factsheet titled CC/FS9, which provides vital information regarding the Human Rights Act and penalties. We recommend that you thoroughly read this document before responding to HMRC.
What should you do If I don’t have any unreported income that requires disclosure?
If you have not engaged in any misuse of electronic sales suppression of your till system and have accurately reported all your sales and income, we would encourage you to confirm this via email to HM Revenue & Customs (HMRC) to confirm. You should utilise the email address specified in the letter and include your Case Reference number, found in the letter.
If there are sales that you have failed to declare, the letter instructs you to utilise the online disclosure form created specifically designed for this campaign.
You can log in using your Government Gateway ID, password, or email address to access the form. If you use your email address, HM Revenue & Customs (HMRC) will send a confirmation code to your email, ensuring its accuracy.
You must inform HMRC about all the relevant years you have undisclosed sales.
If you require additional time to gather and provide the necessary information to HMRC, contacting them and explaining the reasons for the extension is recommended. Depending on the circumstances surrounding your request for extra time, you may also consider contacting HMRC’s Extra Support Team or informing the team responsible for this campaign that you require additional assistance. You can do so by emailing them using the email address in HMRC’s letter. Ensure to include the Case Reference number from your letter.
If you find yourself in a situation where you must disclose any electronic sales suppression and undeclared sales to HM Revenue & Customs (HMRC). It might be beneficial to consider seeking professional advice from a tax adviser or accountant. If you do not currently have an advisor, this could be an opportune time to explore the possibility of obtaining one.
What are the consequences of ignoring the letter or providing inaccurate information?
If you do not respond to a letter HM Revenue & Customs (HMRC) sent by the specified date stated in the letter. In that case, HMRC has the authority to assess based on their estimation of the outstanding amount owed by the business. This assessment will include taxes, interest, and penalties.
When replying to HMRC, even if it is to inform them via email that you have accurately declared all your sales, but HMRC believes that you have provided incorrect information, HMRC retains the right to initiate an inquiry. They are likely to proceed with a compliance check, better known as an investigation if they deem the provided information significantly inaccurate.
Will there be penalties and interest to pay?
If you have made a disclosure in response to the HM Revenue & Customs (HMRC) letter, HMRC will consider it as a prompted disclosure. In such cases, you may be penalised unless you can demonstrate that the omission was due to a genuine mistake and that you exercised all reasonable care to ensure accurate tax reporting.
NOTE: The information contained in this guide is derived from our interpretation of tax law as of the time of publication. Please note that tax laws are subject to change, and the content may not be applicable to your specific circumstances. Therefore, it should not be solely relied upon. It is your responsibility to ensure compliance with tax laws. If your situation involves deliberate behaviour or fraudulent activity, it may be advisable to make a disclosure using the Contractual Disclosure Facility (CDF). If you believe this applies to your circumstances, we recommend that you seek independent advice from an accountant or tax advisor. Contact one of our qualified professional experts here.
