Are there different ways to disclose errors to HMRC?
Yes, there are several ways to disclose and correct a tax problem, depending on the type of error or its seriousness. HMRC has the general
digital disclosure service (DDS) which can be used in many cases. For more information, please
click here.
If there is a disclosure to be made which involves a fraud, it may be that the contractual disclosure facility (“CDF”), which is also known as
COP 9, should be used. For more details, as well as information about what HMRC considers to be fraud or ‘deliberate’ behaviour, please visit
this page.
If your disclosure concerns offshore or non-UK income or gains, then HMRC’s
Worldwide Disclosure Facility (“WDF”) may be appropriate.
If your disclosure relates to income from a let or rented property, HMRC has
The Let Property campaign. Further information can be found
here.
Whatever your concern, we can help you understand which the most appropriate route is to making a disclosure.
Why should I disclose an error to HMRC?
Generally, penalties will be lower if you disclose an error than if HMRC find it. Naturally, HMRC expects your returns to be correct to the best of your knowledge and belief. If you know there is an error in a tax return, HMRC expects you to fix that. It is also possible that HMRC will find that error anyway, HMRC has access to vast sets of financial data.
How many years do I have to disclose to HMRC?
This depends on the ‘behaviour’, i.e. whether you made an innocent or deliberate error. It can also depend on whether the matter involved an non-UK country. HMRC can go back up to 20 years for fraud. However, for innocent errors HMRC may be restricted to 4 years for income and corporation tax. The rules for various taxes can be complex. We work with our clients to understand the exact circumstances of their case so that they don’t disclose problems in years that they do not need to.
What are HMRC’s Nudge Letters?
Sometimes HMRC will send ‘nudge’ letters which prompt a disclosure. Recently it has been doing this where HMRC has information about offshore bank accounts, HMRC has also been very active around second properties, checking whether individuals own multiple properties and whether rental income appears to have all been declared.
People who make their income online have also recently been receiving nudge letters. HMRC has a system called ‘Connect’ which is getting better all the time in pulling information together across multiple information sources and then comparing that information to submitted tax returns. Where gaps or anomalies appear, it will either open an enquiry or in some instances send a ‘nudge’ letter.
