Recommendation 26

HMRC first identified the threat of certain types of electronic sales suppression (ESS) in 2016. In 2019 it estimated that net losses were around £450 million and identified a need for further powers to tackle the issue. The National Audit Office reported that it was not until 2022 that the government introduced new civil enforcement and data collection powers for HMRC in addition to its existing criminal enforcement powers, six years after it first identified the problem, and that it has not yet issued any civil penalties using these powers.80 We asked HMRC why it had taken so long for it to address ESS. HMRC told us that ESS is a complex and technical 72 Q 66 73 Q 68 74 Letter from HMRC to Committee, 10 January 2025 75 C&AG’s Report, para 3.19 76 Committee of Public Accounts, Managing tax compliance following the pandemic, Forty–Ninth Report of Session 2022–23, HC 739, May 2023. 77 Q 92 78 Q 92 79 Q 90 80 C&AG’s Report, para 3.9 17 area but explained that it has made eight arrests in two cases in relation to suppliers of ESS technology. It said that it is looking at using its civil powers where criminal charges are not taken forward. We also asked HMRC when it expects to start using its civil powers more routinely. It told us in the near future it will look to use its civil powers where criminal prosecution does not prove to be the best route forward, but did not provide a definite date.81 HMRC told us it plans to update its estimate of the tax lost due to ESS in spring 2025.82