UK
Ireland
Voluntary disclosures to HMRC
It can be quite easy to make a mistake on a tax return. Telling HMRC before they approach you could help.
HMRC voluntary disclosures
If you know or suspect that you owe additional tax to HMRC, a voluntary disclosure can bring your tax affairs up to date. You can use them to tell HMRC about past income or gains, to correct mistakes in previous years’ tax returns, or to clarify your tax position where the facts or technical treatment are uncertain.
The benefits of making a voluntary disclosure
Proactively informing HMRC about any tax issues will help to lower any penalties they may charge. These are typically much higher when prompted by an HMRC enquiry or investigation rather than a voluntary disclosure.
HMRC nudge letters
HMRC periodically issues ”nudge letters” designed to prompt you to make disclosures regarding targeted HMRC campaigns or specific data obtained by HMRC about potential sources of taxable income and gains.
Disclosures relating to offshore income and assets
HMRC statistics indicate that approximately one in 10 people in the UK have a financial interest overseas:
- Offshore bank accounts
- Holiday or rental homes
- Pensions
- Investments
Most UK resident taxpayers must declare and pay tax to HMRC on any income or gains arising from such financial interests held overseas. The taxation of these interests can be extremely complex, though, and it may be sensible to speak with a tax adviser before completing and submitting your return.
Speak to S&W about voluntary disclosures
If you are unsure what you need to disclose on your tax return, we can help. Our experts will complete an initial review of your assets (whether held in the UK or overseas) to determine whether or not a disclosure to HMRC is necessary. If you need to tell HMRC about an error or have received a nudge letter, we can contact HMRC on your behalf and support you throughout the disclosure process.
For more information on how we can help, call one of our team.
Frequently asked questions about tax disclosures
How do I tell HMRC about underpaid tax from previous years or a mistake in my tax return?
There are many ways to approach HMRC, depending on what you need to do:
- Correct an error
- Inform HMRC of undeclared income or gains
- Check that your tax affairs are accurate and up to date
The best disclosure route depends on why the error happened, its seriousness and whether it relates to offshore interests or specific HMRC campaigns. We can help review your position and advise on the best approach.
What are the Worldwide Disclosure Facility and the Digital Disclosure Service?
The Worldwide Disclosure Facility is a settlement route for people who need to tell HMRC about errors relating to their overseas assets.
You will need to make a notification through the Digital Disclosure Service (DDS). HMRC will then send you a reference number to upload your disclosure. Your disclosure calculates the tax due, interest and penalties, and must be uploaded through the DDS within 90 days.
What do HMRC deem a reasonable excuse for an error on your tax return?
There is no definition in UK tax law of “reasonable excuse”, and it has been the subject of numerous court cases.
HMRC considers a reasonable excuse to be one that stops a person from meeting a tax obligation despite making every effort and taking reasonable care to do so. The reasonable excuse must exist before the tax obligation becomes due.
Although UK tax law does not define a reasonable excuse, it does identify two situations where a reasonable excuse does not exist unless certain conditions are fulfilled:
- Having insufficient funds to make the tax payment
- Reliance on a third party to make the payment on your behalf, such as a tax adviser or legal professional
How much is a penalty likely to be reduced for making a voluntary disclosure?
HMRC can charge several different penalties depending on the issue being disclosed. There are various regimes, depending on whether a return has been filed late, tax has been paid late or an error has been made. Voluntarily disclosing an error to HMRC will reduce the minimum penalty that HMRC can charge as a percentage of the tax due, typically by at least 15%. The exact penalty charged and the reduction given will depend on several factors, including your underlying behaviour leading to the error and your cooperation with HMRC.