HMRC letters: misuse of till system and undeclared sales
HM Revenue & Customs (HMRC) are sending letters to businesses that might have misused their till systems, and as a result not paid the correct amount of tax. This is an opportunity for these businesses to get their tax affairs in order. We explain more about the letters and what to do if you receive one.
Content on this page:
HMRC have started a letter campaign with the aim of encouraging businesses that have misused their till systems to get their tax affairs in order. We expect the campaign to continue for at least the coming year.
HMRC say they have evidence that some businesses use till systems that hide or reduce the value of individual transactions on the businesses’ electronic sales records. These till systems reduce the recorded turnover (sales) of the business. This means the business has lower tax liabilities, but still has what appears to be a credible and compliant audit trail and business records for their sales. This is known as electronic sales suppression (ESS).
What should I do if I receive a letter?
Do not ignore the letter.
You should respond to HMRC by the date stated in the letter (usually within 30 days of the date HMRC issued the letter), even if you do not have any undeclared sales or income you need to tell them about.
HMRC have written to you because they have information that shows you may have misused your till system to reduce your tax bill. If you have used your till system to reduce the recorded turnover of your business, HMRC want you to use this chance to get your tax affairs in order by making a voluntary disclosure.
This is because if you have misused your till system, you may not have paid enough tax, for example income tax, VAT or corporation tax.
You should check that you have correctly recorded and declared all your sales, and that you are not using your till system to hide sales or reduce the value of sales. You should also check that you do not have possession of, or access to, electronic sales suppression tools.
The letter includes an HMRC Factsheet – CC/FS9. This sets out important information about the Human Rights Act and penalties. You should read this before responding to HMRC.
What if I do not have undeclared income I need to tell HMRC about?
If you have not misused your till system, so you have correctly declared all your sales and have declared all your income, you should email HMRC to confirm this. You should use the email address for HMRC provided on the letter and give your Case Reference number, which is also on the letter.
What if I have undeclared income I need to tell HMRC about?
If you have not declared all your sales, the letter tells you to use the online disclosure form to make a disclosure. This form has been set up for this campaign.
You can use the form by signing in using either your Government Gateway ID and password or your email address. If you use your email address, HMRC will send a code to your email address so that you can confirm it is correct.
You should tell HMRC about all the years for which you have undeclared sales.
If you need extra time to provide all the information to HMRC, then you should contact HMRC to explain why you need extra time. Depending on why you need extra time, you may also want to contact HMRC’s Extra Support Team or tell the team dealing with this campaign that you need extra support, by emailing them – the email address is provided in HMRC’s letter. You should include the Case Reference number from your letter.
|NOTE: If deliberate behaviour or fraud is involved, you may be better to make a disclosure using the Contractual Disclosure Facility (CDF). If you think this applies in your case, we suggest you read the article on the CIOT website, which discusses the CDF in more detail.
If you need to tell HMRC about undeclared sales, you may wish to seek professional advice. If you do not already have a tax adviser, you can find one via the CIOT website.
What if I ignore the letter or do not give the right information?
If HMRC do not hear from you by the date set out in the letter, HMRC can make an assessment of what they believe the business owes – this will include tax, interest and penalties.
If you reply to HMRC, including if you email them to say that you have correctly declared all your sales, but they believe you have provided incorrect information, HMRC can open an enquiry – they are likely to do this if they believe the information is significantly incorrect.
What happens next?
HMRC will compare your disclosure with the information that they hold. Their decision will be based on this comparison.
If HMRC accept the disclosure you have made, they will raise an assessment (or tax bill) and tell you how to pay.
If HMRC do not accept your disclosure, they will write to you and tell you. It is likely that they will then start an enquiry.
If you email HMRC to tell them that you have correctly declared all your sales, but they believe that you need to make a disclosure, they will write to you and tell you. It is likely that they will then start an enquiry.
Will I have to pay penalties and interest?
If you have to make a disclosure in response to their letter, HMRC will treat your disclosure as a prompted disclosure. You may have to pay a penalty unless you can show that you made a genuine mistake (you took reasonable care to try to get your tax right).
HMRC charge interest on tax that you pay late. So, you will probably have to pay interest on any tax that you pay as a result of making a disclosure.
If you do not respond to HMRC and they issue an assessment or open an enquiry, then the penalties will be higher than if you make a disclosure voluntarily.
What if I cannot pay all the tax I owe?
If you owe tax, but cannot afford to pay it all in one payment, contact HMRC. You can ask HMRC about setting up a Time to Pay arrangement. If HMRC agree to offer you a Time to Pay arrangement, this will spread the payments of tax that you owe over several months.
Where can I find more information and help?
Examples of the letters that HMRC are sending out are available to view on the CIOT website.
HMRC have published a Factsheet about electronic sales suppression on GOV.UK.
The disclosure form is available on GOV.UK.
You can find more information about tax penalties on our website.
You can find more information about what to do if you cannot pay your tax bill on our website.
If you are unsure about what you need to do in response to this letter, you should seek independent advice. If you can afford to pay a professional tax adviser, you can find more information on how to find one on our website.
If you are on a low income and cannot afford to pay for a professional tax adviser, you should contact the tax charity TaxAid, who may be able to assist you.
If your health or personal circumstances mean that you find it difficult to deal with your tax position, you may be able to get additional help from HMRC’s Extra Support Team.