Voluntary Disclosures
From time to time an issue is uncovered that needs to be corrected and brought to HMRC’s attention. To do so is usually known as a ‘voluntary disclosure’ and is actively encouraged by HMRC. There are a number of routes to disclosure, depending on what the issue is.
The advantage of a voluntary disclosure is that penalty levels are typically lower for an ‘unprompted’ disclosure than they are for one which is ‘prompted’, i.e. one that is made after HMRC open an enquiry or have been in communication with an individual.
Prompted Disclosures
Sometimes HMRC will send ‘nudge’ letters which prompt a disclosure. Recently it has been doing this where HMRC has information about offshore bank accounts, foreign ownership of UK property and disposals of company shares. The nudge letters ask individuals to check that any income arising abroad that should have been in a UK tax return has been dealt with correctly.
HMRC has also been very active around second properties, checking whether individuals own multiple properties and whether rental income has been declared, or capital gains on disposals.
Contractual Disclosure Facility (CDF) and Code of Practice 9 (COP9)
Where a serious, deliberate (fraudulent) issue needs to be disclosed, asking for the CDF provides a route to disclosure that also protects against HMRC undertaking a criminal investigation with a view to prosecution. As long as a full disclosure of all irregularities is made, HMRC will not pursue the matter on a criminal basis.
Worldwide Disclosure Facility (WDF)
The WDF is used to disclose undeclared offshore income or gains. Many individuals are now using this process where nudge letters have been received and further investigation has uncovered errors in the past.
Digital Disclosure Service (DDS)
The DDS is a catch-all for most issues not covered by the above two disclosure regimes. Most property rental disclosures, for example, are done through the DDS.
If you need help to assess whether you need to make a disclosure, perhaps after a nudge letter is received, the inTAX team can help.
Our colleagues at inTAX would be pleased to assist you with any tax enquiries - please contact the team on 0203 675 8122 or email info@intaxltd.com.
