Do You Need To Make A Voluntary Disclosure To HMRC?

Making sure you pay the right amount of tax is essential, and with the introduction of more sophisticated computer systems, it is becoming increasingly difficult for taxpayers to keep things hidden from HMRC ...

If you know you have something to disclose to HMRC then making a voluntary disclosure is always the best approach. This is when you contact HMRC directly to tell them if you think your tax affairs are wrong or that you've not paid the correct amount of tax.

"Doing this yourself, rather than waiting for HMRC to contact you, will result in much lower penalties!"

The amount of these penalties can range from 0% up to 300% of the underpaid tax, depending on the taxpayer's behaviour and the reason for non-compliance. In serious cases of undisclosed tax or income, HMRC may also consider starting a criminal investigation.

There are various ways in which voluntary disclosures can be made. HMRC are currently running a specific Let Property campaign for disclosures of undeclared rental income, but other disclosures can be made via the Contractual Disclosure Facility (CDF) or the Digital Disclosure Service (DDS). If the disclosure involves income, assets or gains outside of the UK, then you would need to use the Worldwide Disclosure Facility (WDF).

"The UK needs to close the tax gap!"

HMRC published data for the 2020/21 tax year showing that the tax gap is estimated to be £32 billion, which is 5.1% of total theoretical tax liabilities. The biggest share of this total tax gap is for Income Tax, National Insurance, and Capital Gains Tax (CGT), which amounted to £12.7 billion. This is closely followed by VAT at £9 billion.

In order to reduce the tax gap, HMRC has started to use a wide range of computer systems to help process and analyse huge volumes of data. The main computer system used by HMRC is called 'Connect' and this has been in use since 2010. Connect can obtain data from many databases to analyse and cross-check with information supplied to HMRC by taxpayers.

"It's important to get the right advice!"

Making a voluntary disclosure to HMRC can be a complicated process and it is recommended that you seek advice from an experienced tax adviser such as myself. I can help guide you through the process and work out the amount of tax due, how many years of tax must be paid, and what the penalties may be.

It really is in your best interests to make a voluntary disclosure.

If you'd like to find out more about anything I've written here, do call me on 01908 774323 or leave a comment below and let's see how I can help you.