HMRC arrests five in multi-million pound till fraud

HM Revenue and Customs (HMRC) has arrested five people of a gang suspected of being behind a multi-million-pound global fraud, that uses software to hide till sales.

The arrests followed a week of coordinated action when more than 100 HMRC officers visited 90 businesses across England, Scotland and Wales as part of an international probe, with enforcement action also taken in the US and Australia.

The businesses are suspected of using an Electronic Sales Suppression (ESS) tool to manipulate their takings to evade paying tax and the HMRC has used data to identify thousands of potential users.

These businesses can now make a voluntary disclosure to correct their records and pay the right tax. The HMRC will follow up with those who don’t come forward, which could lead to more severe penalties.

It is suspected the system was designed and sold by a group based in Staffordshire. Sales are put through the till as normal, but the system allows records to be manipulated by deleting sales and routing card payments through an offshore bank.

The group is also suspected of selling the system to businesses in the US and Australia.

Operations were carried out in Australia and the US during a week of action co-ordinated by the Joint Chiefs of Global Tax Enforcement (J5) alliance, which also includes tax authorities from Canada and the Netherlands.

The latest operation follows a HMRC investigation in May into a different ESS system. Three people were arrested and investigations are ongoing.

“This was a highly sophisticated, truly global attack on the UK and our international partners. The group behind this activity is suspected of enabling thousands of businesses to evade tax in what is a large-scale, technologically enabled fraud,” Simon York, HMRC’s director of fraud investigation, said.

“HMRC’s ground-breaking response, with internationally co-ordinated action, marks a significant moment in our efforts to close the net on those we suspect of designing, supplying and using electronic sales suppression software.

“Most businesses pay the tax that they owe. HMRC is on the side of this honest majority and our action helps to ensure they are not being under-cut by tax-evading competitors.

“This is just the beginning of our work in this area, and we already have other suspected suppliers in our sights. We are urging all users of these types of systems to come to us, before we come to them.”

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.