HMRC Enquiries & Voluntary Disclosures
HMRC is continuing to intensify its efforts to tackle tax non-compliance. With their increasing resources and ability to gather information from various states and financial institutions, it’s essential to address any enquiries or voluntary disclosures promptly and professionally.
We understand that dealing with HMRC can be intimidating, but you don’t have to navigate this alone – we’re here to manage the process for you, ensuring that your interests are protected.
Why make a Voluntary Disclosure?
A voluntary disclosure to HMRC allows you to inform them that you believe you have underpaid tax in the past. This proactive step is typically treated more favourably by HMRC and often results in lower penalties compared to if HMRC were to uncover the issue through an investigation. Additionally, making a voluntary disclosure will bring your tax affairs up to date, giving you peace of mind knowing that your records are in order and reducing the risk of future scrutiny. By voluntarily disclosing any discrepancies, you demonstrate your willingness to comply with tax laws, which can lead to more lenient treatment from HMRC in terms of penalties and interest.
How to make a Voluntary Disclosure?
The process for making a voluntary disclosure to HMRC can vary depending on your specific circumstances, so it’s vital to seek specialist advice to ensure you follow the correct procedure.
Here’s an outline of the typical steps involved:
- Notify HMRC: You must formally inform HMRC that you wish to make a voluntary disclosure. This can be done either online or via paper forms, depending on your situation.
- Identify Mistakes and Omissions: You’ll need to provide a full explanation of any errors, omissions, or miscalculations in your tax records. This includes identifying the relevant tax years or periods in which you believe tax was underpaid.
- Calculate Outstanding Liabilities: You’ll need to calculate the total tax owed, along with any interest and penalties due. This will typically require professional assistance to ensure all calculations are accurate and comprehensive.
- HMRC Review: After receiving your disclosure, HMRC will review the information provided. They may request further details or clarifications to assess the full extent of the underpayment.
- Formal Agreement: Once HMRC is satisfied with the disclosure, you can agree to a formal settlement, which may include payment of any owed taxes, interest, and agreed-upon penalties.
Enquiries
If HMRC suspects that you have underpaid tax or failed to pay tax altogether, they may launch an enquiry into your or your business’s tax affairs. This can include a thorough review of various aspects of your tax filings. You’ll typically receive an official letter from HMRC outlining the areas they intend to investigate.
Why might HMRC investigate you?
HMRC has a range of tools at its disposal to detect potential tax underpayments. Some common reasons HMRC may investigate you or your business include:
- Tax Returns: Discrepancies or errors in your self-assessment tax return.
Company Tax Returns: Issues related to corporate tax filings. - PAYE Records: For employers, discrepancies in PAYE records and tax returns may prompt an enquiry.
- VAT Returns: If you are VAT-registered, any inconsistencies in VAT returns or records could raise red flags.
- Accounts and Calculations: Any issues or inconsistencies in your accounts or the tax calculations submitted could trigger a more in-depth investigation.
- Historical Tax Data: HMRC may use information from other tax years or financial institutions to identify discrepancies.
Why Stratos?
We understand that an HMRC enquiry or the prospect of making a voluntary disclosure can be a stressful and overwhelming experience. Our team of experts at Stratos are here to support you every step of the way.
When you work with us, we will:
- Liaise with HMRC on Your Behalf: We act as your intermediary, ensuring that communication with HMRC is handled efficiently and professionally.
- Review Your Circumstances: We will thoroughly assess your situation to determine the best course of action, ensuring that you follow the right procedure for your disclosure or enquiry.
- Minimise Penalties and Interest: Our expertise allows us to identify opportunities to reduce penalties and interest, helping you resolve your tax issues with the least financial impact.
- Provide Peace of Mind: Our goal is to give you confidence that your tax matters will be handled to the highest possible standard, ensuring a fair and transparent resolution.
FAQs
Do not ignore it, but do not rush to respond without advice. A specialist adviser can help check the scope of the request and prepare an appropriate response.
Yes. Stratos can liaise directly with HMRC, manage correspondence and help ensure your position is properly represented.
A voluntary disclosure is a proactive approach to telling HMRC about previously unreported income, gains or errors so the position can be corrected.
Potentially. Penalties depend on the facts, behaviour, timing and quality of disclosure. Well-prepared representations can help support a lower penalty where appropriate.
Generally, HMRC have up to 12 months to open an enquiry from the date of filing the tax return or amended tax return. Once this 12 months has passed, the tax return will be treated as final. However, although there is a 12 month time limit to open an enquiry, if HMRC have reason to believe that there has been fraud or misrepresentation in your previous tax affairs, they can raise a discovery assessment investigate up to 20 years in the past.
A discovery assessment is similar to an enquiry in that it involves an investigation into your tax affairs by HMRC. However, unlike an enquiry, HMRC must meet specific conditions to open a discovery assessment. They can only initiate a discovery assessment if they can prove that there has been careless or deliberate conduct on the part of the taxpayer. This means that HMRC needs to establish that the error was not accidental and was either the result of negligence or intentional misrepresentation.
The standard time limit for HMRC to issue a discovery assessment is 4 years from the end of the tax year in question. However, this time frame can be extended depending on the nature of the error:
- 6 years if the error is deemed to be careless.
- 20 years if the error is found to be deliberate.
It’s crucial to address any tax discrepancies promptly, as longer time frames allow HMRC to investigate more thoroughly, potentially leading to higher penalties.
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Daniel Hill
Tax Consultant
Dan graduated from the University of York in 2023 with a master’s degree in mathematics. Shortly thereafter, Dan joined the team as a Tax Associate, has recently completed his ATT examinations, and is progressing towards being CTA qualified.
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