Disclosures

Voluntary HMRC Disclosures: Get Ahead of Tax Investigations

HMRC has access to data from many sources including banks, Companies House, tax returns, and internet sales platforms. Their data-matching capabilities are sophisticated and growing stronger each year.

Despite their extensive data collection, however, HMRC doesn’t always have a complete picture of a taxpayer’s liabilities and still relies on them to voluntarily disclose underpayments.

The Benefits of Voluntary Disclosure

Voluntary disclosure demonstrates good faith, typically results in lower penalties compared to those imposed for non-compliance or errors discovered during an HMRC investigation.

By making a voluntary disclosure, taxpayers have more control over the process of correcting their tax affairs. They provide peace of mind whilst bringing your tax affairs fully up to date.

In cases of significant tax evasion or deliberate non-compliance, HMRC has the power to pursue criminal prosecutions. Voluntary disclosure can be seen as a mitigating factor that may reduce the likelihood of facing criminal prosecution for unintentional errors.

It’s important to note that voluntary disclosures are most effective when made before HMRC initiates an investigation or inquiry. Once HMRC has started an investigation, the benefits of making a voluntary disclosure may be reduced.

Disclosure Options

There are different options available when making a disclosure to HMRC. For most straightforward cases HMRC’s online platform would be the best solution, providing access to various disclosure facilities including the Worldwide Disclosure Facility and streamlining the process for most taxpayers.

The Contractual Disclosure Facility, in cases under HMRC’s Code of Practice 9, is for deliberate tax evasion cases.

Depending on the nature of errors, there are time limits on voluntary disclosures: 4 years for careless mistakes, 6 years for deliberate omissions, 20 years for deliberate concealment, and 12 years for offshore matters.

Seeking expert guidance from a tax specialist will ensure you select the most appropriate disclosure pathway.

Penalty Considerations

Penalties can be substantial: up to 100% of unpaid tax for UK matters, and up to 300% for offshore issues. However, voluntary disclosure can significantly reduce these penalties. For offshore matters, those who missed the ‘Requirement to Correct’ deadline face minimum penalties of 150% (reduced to 100% for voluntary disclosures).