New proposals to tackle Electronic Sales Suppression

The government is consulting on potential measures that target Electronic Sales Suppression (ESS). Proposals include the introduction of new software standards for Point of Sale systems. Electronic Sales Suppression (ESS) involves businesses using software or devices to manipulate Electronic Point of Sale (EPOS) systems to hide transactions and evade tax.

While precise quantitative prevalence statistics are inherently difficult to capture for hidden fraud, ESS has been regarded by HMRC as a growing area of tax evasion.

HMRC have identified that certain individuals and businesses in Electronic Point of Sale (EPOS)/Mobile Point of Sale (MPOS) supply chains are developing or modifying POS systems to suppress sales to facilitate tax evasion. HMRC believe that ESS is more prevalent in small retail, takeaway and hospitality businesses.

The government is proposing to introduce software standards for the EPOS and MPOS sector, consisting of a set of uniform rules, protocols and compliance requirements to ensure that every system records sales and financial data accurately, securely and in a way that cannot be easily tampered with or manipulated.

The proposed measures include requiring an unalterable and complete transaction log that contains details of every individual transaction and adjustment, indelibly linked together in an encrypted chain using the Standard Audit File for Tax (SAF-T) format to store sales records. 

The government would also establish a register of EPOS/MPOS systems sold, transferred, or used in the UK. A certification system would show whether the software complies with the new standards. It would also make it compulsory for small retail, takeaway and hospitality sectors to use compliant EPOS/MPOS systems to record all sales.