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  • Making a Voluntary Disclosure

    30 May 2021

    Chris Watts

    For many years, H M Revenue & Customs (“HMRC”) has offered disclosure opportunities, inviting those with undeclared income to come forward and settle with HMRC.

    From HMRC’s perspective, disclosure opportunities are attractive, shifting the workload toward the taxpayer, leaving them to check the details. From the taxpayer’s perspective, disclosure opportunities, while varying in their terms, are preferable to waiting until HMRC opens and enquiry or investigation and offer the chance to mitigate the penalties that would otherwise be imposed. 

    All disclosures are now administered through HMRC’s online Digital Disclosure Service.  This offers a disclosure route for both individuals and companies who wish to make a disclosure but who are not covered by a specific HMRC campaign.  

    There are three stages to making a disclosure:

    1. Notifying HMRC that you intend to make a disclosure;
    2. Preparing and submitting the disclosure within 90 days;
    3. Making a formal offer to HMRC together with payment of the tax, interest and penalties due.

    Currently HMRC are very flexible with the 90 days submission period and have been receptive to extending this time period where there are genuine reasons for a delay.

    The above applies where a disclosure is required to be made where there has been no deliberate or fraudulent behaviour on the part of the taxpayer.  If this is not the case, then a disclosure under Code of Practice 9 should be considered in order to provide an immunity to prosecution for the tax offences, however it is strongly recommended to take advice if this route is being considered.

    HMRC’s information gathering is getting ever more sophisticated and accurate.  It’s Connect system is bringing together information from a variety of sources, both UK and overseas, to identify those it determines have a risk of undeclared income or gains.

    Over the last year or so HMRC have issued so called “nudge letters” to the following groups of individuals and businesses:-

    • Undeclared capital gains on the sale of land and property in 2018/19 tax year
    • Undeclared income or gains from overseas assets
    • Incorrect claims under the furloughing (CJRS) or SEISS schemes
    • Making Tax Digital (MTD) for VAT
    • Use of the Profit Diversion Compliance Facility (transfer pricing, diverted profits tax, etc.)

    Where a disclosure is made before any kind of intervention from HMRC, then it is possible for the tax liability to be settled with only the addition of late payment interest, as a penalty can be reduced to 0% or suspended for a defined period on the basis of full compliance in the future.

    Where liabilities arise from overseas income or gains, a penalty of up to 200% can be applied by HMRC for tax years 2016/17 and before.  However, a voluntary disclosure can reduce this significantly.

    More topically, the rise in the value of cryptocurrencies has meant many individuals have created tax liabilities and not realised it, especially where they have sold crypto assets and reinvested the proceeds into other crypto investments.  Early disclosure of these, especially at a time when HMRC themselves are catching up with the ever evolving world of crypto, will mean the most cost effective way to correct matters as well as ensure advice for future compliance is received.

    ETC Tax can advise on all aspects of making a disclosure to HMRC and any person who wishes to discuss whether to make a disclosure should contact us as soon as possible to ensure the best outcome can be achieved.

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    Please provide as much detail as possible in regards to the reason for your enquiry so our tax advisers can prepare and tailor their response to reflect your needs. We will endeavour to - respond / call you back - to discuss your enquiry and you will not be charged for this time.

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