The CIOT has responded to the draft Finance Bill 2022 legislation on powers to tackle electronic sales suppression (ESS) which occurs when a business deliberately manipulates its electronic sales records to reduce or hide the value of its sales while providing what looks like a compliant audit trail from sale to tax reporting, finding as follows:
although the CIOT strongly supports HMRC’s efforts to deal with tax evasion using ESS, HMRC should explain in its guidance in what circumstances it intends using this new power instead of existing criminal powers;
the UK’s tax code is becoming overloaded with new legislation and it is not always clear why existing provisions are not sufficient to deal with the problem in question;
a formal review of the new legislation should be undertaken in two to three years’ time to measure the effectiveness of the powers to tackle ESS, and HMRC should publish annual statistics setting out the number of times ESS powers have been used;
full consultation in line with HMRC’s tax consultation framework should be undertaken, including on the introduction of new penalties associated with ESS.
the CIOT also questions whether the penalties that have been set (£50,000 for making, supplying or promoting an ESS tool, and £1,000 for possessing such a tool) are at an appropriate level to encourage compliance.
The CIOT has responded to the draft Finance Bill 2022 legislation on powers to tackle electronic sales suppression (ESS) which occurs when a business deliberately manipulates its electronic sales records to reduce or hide the value of its sales while providing what looks like a compliant audit trail from sale to tax reporting, finding as follows:
although the CIOT strongly supports HMRC’s efforts to deal with tax evasion using ESS, HMRC should explain in its guidance in what circumstances it intends using this new power instead of existing criminal powers;
the UK’s tax code is becoming overloaded with new legislation and it is not always clear why existing provisions are not sufficient to deal with the problem in question;
a formal review of the new legislation should be undertaken in two to three years’ time to measure the effectiveness of the powers to tackle ESS, and HMRC should publish annual statistics setting out the number of times ESS powers have been used;
full consultation in line with HMRC’s tax consultation framework should be undertaken, including on the introduction of new penalties associated with ESS.
the CIOT also questions whether the penalties that have been set (£50,000 for making, supplying or promoting an ESS tool, and £1,000 for possessing such a tool) are at an appropriate level to encourage compliance.
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