Is it Necessary to Make a Voluntary Disclosure to HMRC?

By February 4, 2022 February 8th, 2022 Insights

If you make an error or carry out any activity that is non-compliant then you can make a voluntary disclosure to HMRC. This is the process of letting HMRC know yourself without being asked to disclose any information. The idea behind it is to provide people with the opportunity to be honest and transparent when running a business while giving them the chance to correct things when finances and accounts have gone missing.

Should I Disclose Information to HMRC Voluntarily?

It is advised that you think about voluntary disclosure where possible. When HMRC penalise business owners and take legal action, the majority of cases relate to activities where information has not been disclosed which means that there are suspicions of fraud, tax avoidance and deceit.

So, when you do submit a voluntary disclosure, it will remove any evidence linked to deceit. As a result, it will mean that penalties and legal action will be less severe.

Voluntary Disclosure of Improper Activity – What Happens?

When you make a voluntary disclosure that relates to improper activity, HMRC will carry out an evaluation of the issue and seek a way in which the problem can be solved. In the majority of cases, voluntary disclosure will relate to underpayments of small amounts or small errors in self-assessment returns relating to income tax. In these instances, HMRC will calculate the amount you owe, giving you 90 to make the repayment. 

If you have disclosed the fact that you attempted to reduce tax through avoidance schemes then it is likely that HMRC will take the matter further. This can result in legal action where the outcome will depend on the seriousness of the disclosure. However, as you have been honest and made a disclosure early, then it is quite likely that the penalty is going to be less severe than if you continued deceitfully. 

When Is The Time to Think About the Disclosure of Financial Details?

If you are aware of non-compliance with legal responsibilities relating to tax returns or financial reports, then a voluntary full disclosure of accounts should be considered. This is only applicable to those who already have a record with HMRC. 

If you have noticed that there are issues with your accounts prior to submitting them, you have not submitted information that is inappropriate, which means that you can alter issues without disclosure. 

Disclosure would come into play in situations where tax information is incorrect, instances where the numbers given do not match your earning or outgoing or where you have attempted to deceive HMRC via a tax avoidance scheme. 

Failing to Voluntarily Disclose Information – What Happens?

There are a number of outcomes that could occur should you not disclose any tax inaccuracies. There might be no outcome, especially if HMRC never carries out an audit. In instances where you know there are inaccuracies but evidence suggests you are not aware, should an audit take place, HMRC will provide you with a bill containing the amount that you owe.  

Real problems arise where it is clear that you know of issues that should have been disclosed or instances where you knowingly took part in activities to avoid paying tax. The penalties can be high and you could be prosecuted. 

So, where possible, you should declare any errors as this will help to protect your assets and interests. 

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