Voluntary Disclosure (Digital Disclosure Service)

Should I make a voluntary disclosure using the Digital Disclosure Service?

By making a voluntary disclosure using the DDS portal one can achieve the lowest penalty, by controlling the narrative. That is an ‘unprompted’ and comparatively pro-active disclosure, and not a ‘prompted’ one.

Where you wait for HMRC to prompt/nudge/write to you about undeclared income or gains, HMRC are more likely to argue that you have been Careless or acted Deliberately, rather than accepting you tried to take Reasonable Care with your tax affairs.

Make a voluntary disclosure to HMRC – GOV.UK

From our experience, more and more taxpayers seek independent advice from tax disclosure specialists like us after receiving ‘nudge’ or enquiry letters from HMRC pointing out that they have lots of data at their disposal now.

The take home message remains the same, that people who waited for HMRC to contact them, had lost the ability to make a wholly voluntary disclosure. Therefore they were unable to secure the minimum penalties. Also, counter arguments around one’s actions/behaviour were more robustly made by HMRC, leading to more tax years being assessed.

How can I make an voluntary disclosure?

You can voluntarily register your intention to make an disclosure online via the Digital Disclosure Service (DDS) or by calling HMRC. Tax disclosure specialists can help do this too through their Agent portal. You will need:

• your name
• your address
• your National Insurance number, known as a ‘NINO’
• your Unique Taxpayer Reference, known as a ‘UTR’
• your date of birth
• the name, reference and contact details of any agent acting for you

HMRC usually take a few weeks to check whether there is any reason to block the registration, e.g. there is a serious investigation ongoing. After that they will write out to confirm the registration, explain that they expect the full disclosure to be made within 90 days. You will have to:

• gather the underlying rental information and tenancy agreements needed to fill in your disclosure
• calculate the final liabilities including the taxes, interest and penalties (as above)
• complete your disclosure online, and follow-up as necessary too

HMRC encourage making a Payment on Account too because this helps reduce the overall interest payable.

The tax disclosure is submitted using HMRC’s Digital Disclosure Service and should be followed up by email and/or letter with the detailed disclosure report and tax / interest / penalty calculations etc to support the disclosure’s credibility, accuracy and completeness. Failure to follow these steps usually results in HMRC writing out for more information and thus becomes like an enquiry. HMRC should not have to second-guess where and why estimates were used and how any assumptions were made.

After submission, HMRC will send an acknowledgement letter. They aim to have reviewed that disclosure within 90 days of that acknowledgement, and issue an Acceptance Letter or ask questions to verify information and calculations used in the disclosure. In practice, HMRC are usually much quicker.

Can I get more time or help with my tax disclosure?

Some tax disclosures are complex, and so they need more time. Tax disclosure experts can explain that to HMRC and they extend the submission deadline without the need to panic. HMRC don’t give advice though, so remember that you will need to deal with the complexities of the disclosure yourself or by using tax disclosure specialists. For example:

• There may be multiple sources of income, therefore more income and expenditure schedules will be required.
• There may be multiple tax years involved, therefore you may need to make estimates and assumptions where historic income and/or expenditure figures are no longer available.
• Also, the number of tax years to include in the HMRC disclosure might not be easy to conclude, because where tax returns have not been filed but should have been, the Failure to Notify rules apply and HMRC can go back up to 20 years. Where, tax returns were filed but were incorrect, then the reasons for errors must be explained and only then can the number of years can be restricted.

Despite the relatively, voluntary nature of a tax disclosure, it is important to remember that the making of any tax disclosure should be taken seriously. Failure to provide a full and complete disclosure of all relevant tax liabilities may have significant implications with HMRC. That could delay a conclusion and/or make it more costly.

We would therefore advise that any client considering making a disclosure to HMRC to speak to our professionals before initiating contact with HMRC, to ensure that the registration process runs as smoothly as possible and that the chosen disclosure facility is the best disclosure option for you.

Making any kind of disclosure to HMRC can be a nerve-wracking experience. As experienced tax disclosure specialists we fully understand this. We make it our mission to keep up to date with the latest statistics and processes being undertaken by HMRC, to reduce the uncertainty and worry for our clients – offering them peace of mind.

For advisers and potential disclosers, there is good news. The Worldwide Disclosure Facility and Let Property Campaign still have no closure dates. The open-ended nature of the facilities mean that it is still a good time to review one’s overseas accounts and investments and letting activities to ensure taxes are considered and paid as appropriate.