Is there value in making a voluntary disclosure to HMRC?

October 17, 2023

Chris MoirIt is well-known that HMRC have ramped up the number of tax investigations being launched in recent years. However, what seems lesser known, and is perhaps more surprising, is that the number of voluntary tax disclosures also continues to rise.

HMRC are not shy in letting people know that they have the means and resources to pull data from a vast amount of sources including Companies House, banks and letting agencies whilst cross-checking self-assessment tax returns.

Agreements in place to exchange information with overseas tax jurisdictions, as well as a sustained effort to increase public awareness of high-profile tax compliance issues and tax evasion cases, have all contributed to HMRC’s continuing drive to narrow the ’tax gap’ which arises partly from taxpayer error or non-disclosure.

But whilst the threat of HMRC catching up with those individuals who do not have their tax affairs up to date exists, there is always the option to make a voluntary disclosure of outstanding liabilities to HMRC.

A voluntary disclosure, unprompted by HMRC, serves as an opportunity for individuals to rectify an incorrect or overdue tax declaration and put their affairs in order.

But what is the value of making a voluntary disclosure?

If you decide to disclose all of your incorrect or undisclosed tax issues voluntarily, it will put you in a better position with HMRC from the off.  Unless you have a ‘reasonable excuse’ for the error or non-disclosure, then HMRC will charge a tax-geared penalty in addition to the tax due, as well as interest.  Such penalties are reduced when a disclosure is made voluntarily and you are fully compliant throughout the process.

HMRC may not dig as deeply into your case as they would have had they opened the investigation themselves and at the very least it will bring you peace of mind knowing that your tax matters are up to date.

So where do I start?

A voluntary disclosure can be made via HMRC’s Digital Disclosure Service, which is an online service that allows individuals to complete their disclosure from start to finish, in many cases without even the need to speak to someone at HMRC.  Where a disclosure relates to non-UK income and gains, the Worldwide Disclosure Facility (also online) must be used.

Whether the disclosure relates to UK or non-UK income or gains, the processes are similar and involve the following:

  • Notifying HMRC that you want to make a disclosure
  • Receiving confirmation and a registration number from HMRC
  • Telling HMRC what went wrong and why the mistakes or omissions were made
  • Calculating how much tax, interest and penalties are due
  • Letting HMRC check the disclosure
  • Reaching a formal agreement

As there are many factors to consider, if you are in position where you feel you need to make a disclosure you should speak to your professional advisors as soon as possible. Tax investigations are often complex, timely and expensive. An expert will help to determine the best course of action and guide you through the process.

For further information or advice on managing HMRC investigations, making a disclosure or all other aspects of personal taxation, please email Chris Moir or call on 0191 256 9500.


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