Making a Voluntary Disclosure to HMRC – How To Do It

By October 5, 2022 October 20th, 2022 Insights
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If you have undeclared income and know that you owe tax on it, then it makes perfect sense to be honest and upfront about it with HMRC. Should you not declare it, you might find that you will have to pay penalties or you don’t want them to find out about it in the future as this could also be costly.

How Does HMRC Learn About Undeclared Income

You might think that HMRC is unaware of any undeclared income that you have earned but this is not the case. This is because many organisations and businesses constantly provide information to HMRC which includes the likes of the UK Banks, eBay, Land Registry and even Experian. Therefore, it can prove impossible to stay off the radar of HMRC.

How Do You Make a Voluntary Disclosure?

If you believe that the time has come to make a voluntary disclosure to HMRC then this has to be done through their Digital Disclosure Service. This service is used to cover a wide range of unpaid taxes and this can include National Insurance Contributions, Income Tax, Corporation Tax and even VAT. However, before you take the next step, you must inform HMRC that you have the intention to make a voluntary disclosure. At this point, you won’t have to declare to HMRC how much tax you actually owe. You will then be required to complete a DDS form that is then submitted to HMRC.

Once they have received this, you will be provided with a Disclosure Reference Number that is unique to you as well as a Payment Reference Number. Both of these are required in order for you to make your payment. 

Working Out How Much You Owe

It is important that you accurately calculate the amount of tax that you owe. This amount can be determined by understanding which tax rate is applicable to the amount that you earned beyond your personal allowance. As of the current financial year of 2022/23, the personal allowance is £12,570, so anything that you earn above and beyond that and up to £100,000 must be calculated.

Once you have the figure, you then need to inform HMRC that this is the amount you will pay. HMRC will then consider this offer and if they agree to the amount then this will form a legal contract between you and HMRC. It is also recommended that you send your payment and disclosure together at the same time. If you do not do this, then you will need to make sure that you pay it within 90 days after you have received the original notice.

After Your Disclosure

It is not just a case of HMRC receiving your disclosure then closing the matter and considering it complete. HMRC might still believe that you owe more money and if that is the case, then they will get in touch with you. Should HMRC also come across errors in your disclosure, then you are likely to face an increase in penalties. However, if your voluntary disclosure is accepted then you will receive notice of this within two weeks.

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