Proposed new software standards likely to make tax audits easier

The government is consulting on potential measures that target Electronic Sales Suppression (ESS). Proposals include the introduction of new software standards for Point of Sale systems.

In recent years, ESS has been the subject of government reports, consultations and new legislation, yet it remains a cause of concern for HMRC. ESS involves manipulating digital sales records to reduce income tax and evade tax.

HMRC have identified that certain individuals and businesses in Electronic Point of Sale (EPOS) and Mobile Point of Sale (MPOS) supply chains are developing or modifying POS systems to suppress sales to facilitate tax evasion.

EPOS and MPOS systems are particularly used by retail businesses to record sales and deal with other business transactions. HMRC believes that ESS is more prevalent in small retail, takeaway and hospitality businesses.

The government is proposing to introduce software standards that will consist of a set of uniform rules, protocols and compliance requirements that ensure every system records sales and financial data accurately, securely and in a way that cannot be easily manipulated or tampered with. No timeline for when this will be implemented has been provided yet.

According to the proposals, businesses in the small retail, takeaway and hospitality sectors will be mandated to use compliant EPOS/MPOS systems to record all sales. The intention is that specific information, such as QR codes, will be included on receipts that will make auditing easier. This could allow and HMRC officer to make an unannounced visit to check the integrity of the system and verify summary values on the report.

Businesses that use EPOS/MPOS systems will want to stay up to date with how these proposals develop over coming months. The consultation closes on 18 August 2026. Further details on the consultation and how to respond can be found here.