Till fraud: Disclosure facility for coming clean closes on 5 January

Businesses thinking of coming clean over their use of Electronic Sales Suppression (ESS) software must register by 5 January if they plan to take advantage of the HMRC’s disclosure facility, although other disclosure routes may still be available, accountancy and business advisory firm BDO has advised.

ESS till systems seek to manipulate takings in order to reduce a business’ tax bill. While sales are put through the till as normal, the ESS systems allow records to be manipulated by deleting sales and routing card payments through offshore banks.

HM Revenue and Customs (HMRC) opened a special disclosure facility on 8 December for businesses that have used ESS systems.

This followed the news that the HMRC officers had visited 90 businesses across Britain as part of a global investigation into ESS systems which are thought to have been used by thousands of businesses. The agency has also arrested five people of a gang suspected of being behind a multi-million-pound global fraud.

Affected businesses have until tomorrow (5 January) to register their intention to use the facility, and disclosures must be made between 6 January and 9 April. The HMRC has advised that this voluntary disclosure route will allow businesses to correct their records and pay the right tax. It also warned that those who don’t come forward could receive more severe penalties.

However, BDO has advised there are other routes for businesses to disclose their use of such systems which may also offer the benefit of immunity from criminal prosecution.

“HMRC has been working to crack down on this type of till fraud for some time. Last year’s arrests and the targeting of businesses thought to have used these ESS systems shows the tax authority is serious about tackling this type of activity,” Jon Claypole, a tax dispute resolution partner at BDO, commented.

“While HMRC’s disclosure facility is one option for affected businesses, the fact that it was extremely time-limited may mean very few businesses actually come forward. However, there are other disclosure routes, in particular the contractual disclosure facility or 'Code 9' route which may offer immunity from prosecution. We would certainly advise all affected businesses to seek appropriate advice so they can regularise their tax affairs and pay what is due.”

Businesses involved in making, supplying, or promoting ESS systems now face fines of up to £50,000. As part of investigations into ESS, the HMRC can also recover tax evaded and launch investigations that could result in criminal convictions.