Sales and profit adjustments featuring cream-off module

A few years ago the “cream-off module” forming part of certain point-of-sale (POS) or cash register systems caused quite a stir. The inclusion of the software in question in an automated cash register enables the exclusion – be it in whole or in part – from the sales figures of transactions routed through the cash register. The Tax and Customs Administration has a list at its disposal of cash register systems that come with a cream-off module or can be (retro) fitted with one, and can be relied upon to take action (in terms of turnover tax, income tax and/or corporation tax!) where it finds that use has been made of such a module. 

A private limited-liability company that operated a wok restaurant had several additional turnover and corporation tax assessments imposed upon it for having used a cash register system boasting a cream-off module. A probe of the cash register system confirmed the module as effectively having been deployed, resulting in part of the restaurant’s sales being kept off the books. According to the Tax and Customs Administration it had been the shareholders in the private limited-liability company who had been using the cream-off module with the intention of hiding part of the profit from view. The profit adjustments made at the level of the company ended up being taken into consideration, as profit disbursements made to the shareholders, in the additional income tax assessments, on top of which the Tax and Customs Administration slapped negligence penalties both on the company itself and on the latter’s shareholders. 

The ensuing court proceedings concerning the additional tax assessments involved the onus of proof being reversed and amplified owing to the tax payer’s failure to file the requisite tax returns, as the District Court established on the basis of the findings regarding the availability and actual deployment of the POS cream-off module. The Court gave short shrift to the shareholders’ contention to the effect that it had been a particular employee who had been using the module for personal gain, asserting that it was uncharacteristic of the average business owner without any sort of monitoring to delegate the entire POS closure operation to a member of staff. 

Arguing that the covert sales estimates arrived at by the Inspector of Taxes had been fair, the District Court upheld the additional turnover and corporation tax assessments as the company and the latter’s shareholders had failed to satisfy the amplified onus of proof. The Court did, however, mitigate the penalties owing to the underlying basis having been fixed on application of the reversal of the onus of proof and in consideration of the fat that the amount of time the tax authorities had taken to deal with the case had exceeded the reasonable term for such matters.

Dutch version: Omzet- en winstcorrecties met afroommodule