Tax disclosures

Find out more about making a tax disclosure and the potential benefits of doing so

For many people, it can be quite easy to make a mistake on a tax return. Telling HMRC before they approach you can be beneficial to everyone involved.

Voluntary tax disclosures

If you know or suspect that you may owe additional tax to HMRC, a voluntary disclosure can be made to bring your tax affairs fully up to date.

Voluntary disclosures can be made to tell HMRC about past income or gains, to correct previous mistakes in tax returns, or simply to clarify your tax position where the facts or technical treatment are uncertain.

The benefits of making a voluntary disclosure

Proactively informing HMRC about any tax issues will help to lower any penalties that they may charge. These penalties are typically much higher when prompted by an HMRC enquiry or investigation rather than a voluntary disclosure.

HMRC nudge letters

HMRC periodically issue so-called ‘nudge letters’ which are designed to prompt you to come forward and make disclosures in respect of targeted HMRC campaigns or specific data obtained by HMRC about potential sources of taxable income and gains.

Disclosures relating to offshore income and assets

HMRC statistics indicate that approximately 1 in 10 people in the UK* have a financial interest overseas. This includes:

Offshore bank accounts
Holiday or rental homes
Pensions
Investments

Most UK resident taxpayers will need to declare and pay tax to HMRC on any income or gains arising from financial interests held overseas. The taxation of these interests can be extremely complex and it may be sensible to speak with a tax adviser before completing and submitting your tax return.

Speak to Evelyn Partners about tax disclosures

If you are unsure about what you need to disclose on your tax return, we can help. Our experts will complete an initial review of all of your assets (whether they are held in the UK or overseas) to determine whether or not a disclosure to HMRC is necessary. If you need to tell HMRC about an error or have received a nudge letter, we can contact HMRC on your behalf and support you throughout the disclosure process.

For more information on how we can help, call one of our team now.

Frequently asked questions about tax disclosures

How do I tell HMRC about a mistake on my tax return?

There are many ways to approach HMRC about a tax issue. The best way to do so depends on whether you need to:

Correct an error
Inform them of omitted income or gains
Seek assurance that your tax affairs are accurate and up to date

The best disclosure route depends on why the error has happened, how serious it is and whether it relates to offshore aspects or specific HMRC campaigns. We can assist by reviewing your current position and advising on the best approach.

What is the Worldwide Disclosure Facility?

The Worldwide Disclosure Facility is a settlement route for people who need to tell HMRC about errors relating to their overseas assets.

A notification will need to be made to HMRC via the Digital Disclosure Service (DDS). On receipt of this notification, HMRC will send you a specific reference number to upload your disclosure. Your disclosure, which calculates the tax due, interest and penalties, will then need to be uploaded via the DDS within 90 days.

What do HMRC deem a reasonable excuse for an error on your tax return?

There is no definition of ‘reasonable excuse’ in UK tax law and it has been the subject of many court cases.

HMRC considers a reasonable excuse to be something that stops a person from meeting a tax obligation when they have made every effort and taken reasonable care to meet that tax obligation. The reasonable excuse must therefore exist before the tax obligation becomes due.

Although the UK tax law does not define a reasonable excuse, it does identify two situations where a reasonable excuse does not exist unless certain conditions are fulfilled. These are:

Having insufficient funds to make the tax payment, and
Reliance on a third party to make the payment on your behalf, such as a tax adviser or legal professional

How much is a penalty likely to be reduced by for making a voluntary disclosure?

HMRC can charge a number of different penalties depending on the issue being disclosed. For example, there are different regimes depending on whether a return has been filed late, tax has been paid late or an error has been made. By voluntarily disclosing an error to HMRC, this will reduce the minimum penalty that HMRC can charge as a percentage of the tax due, typically by at least 15%. But the exact penalty charged and the reduction given will depend on a number of different factors, including your underlying behaviour that led to the error and your level of cooperation with HMRC.

* Source: HMRC, No safe havens 2019

This information is for UK residents only.

If you are a US-connected client of Evelyn Partners, see our US website.