On 25 August 2026 HMRC published a new factsheet about till fraud, and it contains a rule that catches people out. You can be charged a penalty for having a sales suppression tool on your system even if you never switched it on. Possession alone is enough.
TL;DR: HMRC can charge up to £1,000 for possessing an electronic sales suppression tool, plus up to £75 a day until you remove it. An ordinary till isn't an ESS tool, but configuring one to hide takings can make it one. Keep your Z reports and till rolls for six years.
What Is Electronic Sales Suppression?
Electronic sales suppression is using a tool to hide or reduce the value of individual transactions on a business's electronic sales records, either at the point of sale or afterwards. The books look complete when they aren't.
HMRC's definition, in factsheet CC/FS68A (2026), covers software, computer code and hardware. It also covers "using and/or configuring a till, or point of sale (POS) system, in a way that suppresses sales".
The scale is contested. HMRC's indicative 2019 estimate put annual ESS losses at £450 million or more, but it told the National Audit Office the figure rested on small subsets of data and assumptions that may not hold across the wider small business population (NAO, 2024). HMRC's 2026 consultation now frames it as VAT losses alone. Either way, it is the most recent published estimate.
Can an Ordinary Till Become an ESS Tool?
Yes, if it's configured to suppress sales. The hardware you bought isn't the problem. What matters is how the system has been set up and used.
Schedule 14 of the Finance Act 2022 sets a two-part test. The tool must be capable of suppressing sales records, and it must be reasonable to assume that suppressing them is the main function of the tool, or one of its main functions (legislation.gov.uk, 2022). That second limb is broader than it looks, because a till can have several main functions at once.
So a standard EPOS supporting voids, refunds and corrections isn't an ESS tool, since retailers genuinely need those functions. Change the settings so the system strips takings out of the record and it can fall inside the test. CC/FS68A warns businesses not to configure EPOS settings in a way that "creates or activates" an ESS tool, which is HMRC saying plainly that an ordinary till can be turned into one.
What Are the Penalties for Possessing an ESS Tool?
Possession covers owning a tool, having access to one, or trying to get access. The initial penalty is up to £1,000. HMRC can then charge up to £75 for each day you keep it, and those daily penalties are capped at £50,000. That cap applies to the daily charges alone and sits on top of the initial penalty.
You normally get a warning first. HMRC writes telling you to remove the tool, and you have 30 days to satisfy them you've done it. Miss that window and the fixed penalty follows, with daily penalties running until you comply.
That warning disappears on a repeat. If HMRC charged you an ESS penalty in the previous five years, it charges the full £1,000 immediately with no letter, and the daily rate is normally the full £75.
These are civil penalties, and not the whole exposure. Where suppression means tax was underpaid, inaccuracy and failure-to-notify penalties reach 100% of the tax due on top.
Why HMRC Withdrew Its Own Guidance
While the possession penalty remains in force, HMRC has pulled its guidance on the larger penalty and admitted it was wrong.
On 31 July 2026 HMRC archived its whole Compliance Handbook section on the penalty for making, supplying or promoting an ESS tool. The change note is blunt: "Archived as the guidance is incorrect. The ESS Technical Team are working with legal to revise the guidance" (HMRC Compliance Handbook updates, 2026).
The older factsheet, CC/FS68, was withdrawn on 13 February 2026 as out of date. Its replacement covers possession only. So the £50,000 maximum for making, supplying or promoting a tool still sits in the statute, but no live HMRC guidance explains how it is applied. That gap matters most to EPOS resellers and developers, the people that penalty targets.
What Should You Do If an ESS Letter Arrives?
Respond, even if you've done nothing wrong. HMRC has run several rounds of one-to-many "nudge" letters on ESS, and the response rate has been poor. Grant Thornton reported that only around one in seven recipients replied to an earlier round (Grant Thornton, 2025).
One question clients always ask is whether their accountant gets a copy. They don't. HMRC does not copy these letters to advisers, as the Association of Taxation Technicians has flagged, so you have to forward it yourself.
HMRC's disclosure form works in both directions. You can use it to state that you have no undeclared sales, which is what most recipients actually need to do. Silence reliably makes things worse, moving you from a routine risk letter towards a formal check.
What Records Prove Your Till Is Clean?
Your audit roll and Z reports. HMRC's VAT Traders' Records Manual calls audit and journal records "vital records in testing the credibility of accounting information", and says all Z reports should be consecutively numbered, dated and timed (VATREC3040).
The same page says full till rolls should be kept for six years, with a minimum of four where a concession is requested, and Z prints for the full six. Six years is the safe default, matching the retention period for VAT records generally under VAT Notice 700/21 (2024).
Watch one trap. Retail schemes let you keep a single digital record of daily gross takings for Making Tax Digital purposes. That relaxation covers what you must hold digitally, not what you may delete: HMRC still expects the underlying till data.
Beyond the minimum, what we see most often in well-run businesses is a manager login for voids, refunds and overrides, a reason code against each, and card settlements reconciled to Z totals.
What HMRC Is Planning Next
A consultation on building anti-suppression features into till software closed on 18 August 2026, and HMRC is still analysing responses (GOV.UK, 2026). No response has been published and no implementation date has been set.
The proposals are substantial: an unalterable transaction log in the international SAF-T format, transaction chaining so altering an earlier receipt breaks the chain, QR codes so an officer can verify integrity in store, and possible mandatory use of compliant systems in higher-risk sectors.
HMRC's stated preference is updating existing systems rather than replacing them, and it says the average high street business would see very little day-to-day change. The consultation contains no funding commitment and no carve-out for very small or cash-only traders.
Enforcement is scaling meanwhile. HMRC plans more than 30,000 interventions across high street businesses in 2026-27, drawing on a new team of 350 criminal investigators tackling small business evasion, about half of it focused on the high street (GOV.UK, 2026).
Frequently Asked Questions
Which businesses does HMRC consider highest risk?
Small retailers, takeaways and hospitality, according to HMRC's 2026 consultation. Its June 2026 high street crackdown named vape shops, barbers, souvenir shops, candy stores and convenience stores, though that operation targets money laundering as well as tax.
Has HMRC actually charged anyone an ESS penalty?
Not as at September 2024. The National Audit Office found HMRC "has not yet issued any civil penalties using these powers", though HMRC believed the publicity had a deterrent effect. Criminal enforcement is separate and continued. No count has been published since, so treat that as the last confirmed position.
Is there a safe percentage of voids or refunds?
HMRC doesn't publish one, and be wary of anyone who quotes you a threshold. What matters is that every void and refund has a genuine commercial reason you can evidence.
Does this affect me if I'm not VAT registered?
Yes. The Schedule 14 penalties apply regardless of your VAT position, and suppressed takings understate profits for income tax or corporation tax too. If you're weighing up registration, our £90,000 VAT threshold guide covers it.
How long do I have to appeal a penalty?
Thirty days from the date HMRC notifies you. You can send new information to the officer handling the case, ask for a review by an officer not previously involved, or go to a tribunal. You can also argue you were unaware the tool was a suppression tool, though the onus is on you. The same 30-day window applies to payment, after which the penalty is recoverable as a debt due to the Crown.
If you run a till-based business and want to be sure your records would stand up to a check, get in touch. We'll review how your EPOS records voids and refunds, check your Z report sequence and retention, and say plainly whether anything needs tidying before HMRC asks. You can also see our accounting and tax services.