What is an HMRC disclosure?

If you find yourself unable to sleep at night due to unresolved tax problems, then it may be that you need to consider making an HMRC disclosure. However, before deciding whether or not this process is right for you, it would seem sensible to arm you with some relevant information.

Within this area of the website; we look at:

  • The different types of HMRC disclosure available
  • How to choose the right HMRC disclosure option for you
  • The implications of making the right choice

What is a Prompted HMRC disclosure?

This is a very important distinction to understand before we begin. A prompted disclosure is defined by information volunteered to HMRC during the course of any ongoing compliance intervention. In other words where HMRC have already written to you advising that a check of self assessment or compliance check has begun and you disclose information to them that they may not have ordinarily discovered. It is deemed to a prompted disclosure because HMRC’s view is that this information may not have been disclosed to them have they not launched a tax investigation. I effect they have almost “knocked on your door” prompting you to make a disclosure to them as part of an ongoing compliance process.

What is an Unprompted HMRC disclosure?

An unprompted or voluntary HMRC disclosure is a process whereby you come forward and notify HMRC that you have identified irregularities in your tax affairs that have resulted in unpaid tax. HMRC deal with unprompted or voluntary disclosures much more sympathetically than in circumstances where they discover tax irregularities and launch an investigation under their own civil powers. You can read more about the different types of civil tax investigations launched by HMRC; by visiting each of the links below:

IS AN HMRC DISCLOSURE RIGHT FOR ME?

Firstly what are the nature of your concerns? Do you have a previously undisclosed source of income for example? Have you over claimed expenses relative to your business? Have you returned all of your income to HMRC?

These are all key questions you should be asking yourself before deciding if an HMRC disclosure process is right for you.

What are the most common type of HMRC Disclosure?

The most common type of HMRC disclosure cases we come across involve undisclosed income. Within that we have found that undisclosed rental income is the the most prevalent in recent times. This has been driven by the publicity afforded to this by HMRC’s Let Property Campaign. However, any failure to notify HMRC of chargeable income is treated as an offence under the Taxes Act.

If you have any source of taxable unknown to the taxman then an HMRC disclosure is definitely right for you.

HMRC information sources

When considering whether you should come forward and make an HMRC disclosure voluntarily; you may well be weighing up the chances of getting caught. The risks of HMRC identifying you as somebody committing tax evasion have increased dramatically in recent years. The department are now throwing vast resources at compliance. Systems designed to target those not paying their taxes. This approach is only going to intensify in the post Covid-19 era. There really has never been a better time to come forward and make an HMRC disclosure.

HMRC Connect

We have dealt with HMRC intelligence gathering in many articles across our website. The biggest and most effective interrogation tool available to HMRC is the “Connect” system. This computer system is designed collate, absorb and critically analyse information and data across a range of platforms available to HMRC. The department is looking to increase the scope and effectiveness of “Connect” all the time. We have recently seen evidence of its effectiveness in screening merchant websites to identify those selling goods and services online.

Why offer errant taxpayers the opportunity to come forward and make an HMRC disclosure?

Well quite simply this is a cost measure. Of course, HMRC will never identify every taxpayer who is operating outside of the law. Moreover, even if it were possible to do so, the resources and costs associated with investigating every case would be prohibitive. Instead HMRC adopt a policy of “carrot and stick”. Come forward and make a voluntary disclosure in advance of us catching up with you and we will treat you more leniently.

Is an HMRC Disclosure cost effective?

Dealing with an HMRC disclosure is much more cost effective for the department on the basis that it is professionally prepared and of course truthful. Cost savings for HMRC mean more lenient treatment for you. Remember you have come forward voluntarily. The second element of that equation is almost self-governing. Why after all would you be stupid enough to come forward with half a story during the HMRC disclosure process?

E-TRADING AND THE HMRC DISCLOSURE PROCESS

E-trading has very much become the subject of HMRC scrutiny in recent years, with the increased use of very sophisticated internet tracking technology.

If you are trading in any way on the internet and have not notified HMRC, then you should certainly be looking to come forward. An HMRC disclosure will save you the time and money associated with a full blow tax investigation.

WHAT ARE THE BENEFITS OF MAKING AN HMRC DISCLOSURE?

Making an HMRC disclosure has several clear benefits if it is done properly. You can only achieve this by appointing a tax investigation specialist to prepare your HMRC disclosure professionally and to the departments standards. A poorly prepared HMRC disclosure can be counter productive and costly. Remember this is your opportunity to come forward and clean up your tax affairs in one hit. Your HMRC disclosure must be complete, robust and comprehensive.

If you achieve all of that, your HMRC disclosure will result in you receiving:

  • Immunity from prosecution
  • Favourable penalties to reflect the fact you have come forward
  • Time to pay any tax you owe

Most importantly, a successful HMRC disclosure will see you free of the stress and worry. No more sleepless nights dreading the day when HMRC catch up with you and launch a tax investigation or worse.

COULD MY HMRC DISCLOSURE MAKES THINGS WORSE?

If your HMRC disclosure is not comprehensive and robust this will only result in a loss of HMRC goodwill and a prolonged and expensive HMRC investigation. Worse still, you could find yourself in worse trouble for making materially false statements, however well meaning your intention.

CAN I BE PROSECUTED IF I MAKE AN HMRC DISCLOSURE?

This is the good news. If your HMRC disclosure is prepared correctly; based upon honest, full and frank information supplied to the best of your knowledge and belief then you will not be criminally investigated or prosecuted as part of the HMRC disclosure process. Any adviser who tells you differently is misrepresenting the facts. Your HMRC disclosure can only aggravate to a criminal matter if you are not fully truthful and complete. Making a deliberate, materially false statement as part your HMRC disclosure could quickly lead you into troubled waters.

HMRC can remove your immunity from prosecution at any stage during the process; if they feel you are not being completely honest. Appointing the right HMRC disclosure specialist is vital; as they will manage everything for you and ensure that your disclosure is complete, robust and meets HMRC standards. You can read more detailed information on HMRC’s Criminal Prosecution Policy by visiting our dedicated page; linked below.

HMRC’s criminal prosecution policy

CAN I SUBMIT AN HMRC DISCLOSURE IF I DO NOT HAVE COMPLETE RECORDS?

Absolutely. We rarely prepare an HMRC disclosure with complete records available to us. HMRC expect there to be gaps in information or documents; when dealing with historical matters such as this. Invariably there will be some form of reconstruction exercise as part of your HMRC disclosure report. Contemporaneous evidence is an unrealistic ideal in most cases; so reports are often prepared on a best evidence basis. This can be a complex area; so your chosen adviser will be able to provide you with more detailed guidance.

WE ARE HMRC DISCLOSURE SPECIALISTS

It is inevitable that you will retain doubts and fears after reading this page. Do not leave any questions or concerns that you have unanswered. We have decades of experience in dealing with HMRC disclosure reports of all shapes and sizes. There is nothing we haven’t heard or seen. We never judge. We never scaremonger. We never rush our free HMRC disclosure consultations. Please do pick up the phone and call us. You will be so glad that you did.

Further reading

For more information on voluntary disclosures you may wish to take some time to read the following articles: