HMRC raids 24 restaurants amid crackdown on till fraud

The HMRC has commenced a crackdown on electronic till fraud, with its Fraud Investigation Service having already raided 24 restaurants and takeaways, Pinsent Masons has reported.

These raids follow the end of an amnesty earlier this year, which allowed businesses to make a disclosure to HMRC and pay any tax that has been evaded through illegal Electronic Sales Suppression (ESS) software.

ESS software is known to have been used by some high street businesses, takeaways and restaurants on their tills to evade tax to hide or reduce the value of purchases made via debit cards and credit cards at the point of sale. 

In some cases, the software automatically redirects a percentage of the income from sales into a hidden bank account, fraudulently reducing the income the business reports to HMRC.

HMRC classifies the use of the software as tax fraud, meaning those who do not come forward are at risk of facing criminal investigation that potentially results in “considerable” penalties and even prison sentences.

An earlier investigation into makers of the illegal software by HMRC is thought to have uncovered their full customer list. This means that the FIS has a comprehensive list of businesses to investigate over the coming months.

HMRC has had increased information and penalty powers in relation to ESS since 2022, including the power to impose penalties of up to £50k for possessing an ESS tool. The penalties can be charged even if the tool has not been used to evade tax.

Sophie Warren, tax investigation expert at Pinsent Masons, said: “Businesses that defrauded HMRC using ESS software had an opportunity to come forward to HMRC by 9 April 2023 to avoid raids and criminal investigations. Those who didn’t come forward are now being targeted by HMRC and the financial penalties are likely to be far more severe.

“HMRC will be looking at all businesses that could use an ESS tool, not just restaurants and takeaways. More investigations and raids are expected.”