HMRC disclosure support is often difficult to find. Especially when you aren’t even sure how much you owe on your tax position. Making a HMRC voluntary disclosure always seems to be a daunting task to people. However, its one of the best things you can do when you know you owe undeclared tax to HMRC and want to avoid a HMRC Enquiry.
Being transparent with HMRC in all communications is critical. Providing inaccurate or misleading information can lead to serious consequences.
Case Study Background
In 2024, MJ Kane & Co. Accountants Ltd was approached by Limited Company X’s Director, to act on behalf of their business.
The company faced significant discrepancies in their VAT and PAYE/NIC payments. The issues arose due to the negligence of the company’s previous accountant, who failed to properly manage and notify the client of their tax obligations.
The director attempted to work with his former accountant in order to rectify the situation with HMRC. However, they were met with several obstacles which ultimately resulted in the case going unresolved for a further year!
HMRC Disclosure Challenge
After a review by MJ Kane’s partners, it was identified that the company had unpaid VAT liabilities totalling circa £210,000 and PAYE/NIC liabilities of circa £350,000. The discrepancies spanned a period of 5 full years for both VAT and PAYE/NIC.
It was clear from the start that the director was unaware, throughout the years, of these outstanding payments. The non-submission and non-reporting were attributed to the previous accountant’s oversight, particularly regarding the cessation of direct debit payments and failure to reconcile the accounts liability position to the bank payments, or lack of in this case.
When it comes to a HMRC enquiry and a HMRC voluntary disclosure, prompt action and responses are important. These build your case as a reasonable party and can help in reducing penalties and interest charges at the conclusion of the case.
HMRC’s penalty structure is made up of 3 criteria. Avoiding or at least reducing these penalties should be your main priority. This is the main area in which you’ll reduce the final liability owed.
The criteria are made up of the following:
Voluntary Disclosure Approach
MJ Kane & Co. took over the case in order to bring the tax position and situation up to date and to a close. We did this by conducting a thorough audit of the client’s financial records. This is important, as a big factor in successful resolution of a voluntary disclosure revolves around presenting accurate records to the HMRC agent handling the disclosure.
A voluntary disclosure was made directly to HMRC. Detailing the identified liabilities and the steps the client had taken to rectify the situation. The disclosure included a request for a six-month payment plan to manage the outstanding amounts without causing financial hardship to the client. As well as an upfront payment as a confidence builder and gesture for HMRC’s benefit.
The goal was to demonstrate the director and Limited Company X was reasonable in their attempts to rectify the situation.
Voluntary Disclosure Outcome
The voluntary disclosure was well-received by HMRC, resulting in the acceptance of the payment plan and raised assessments, without the need for the client to incur additional costs in filing 5 years’ worth of returns. A massive success.
As well, because of our insistence with Limited Company X to be transparent and prompt, HMRC did not impose any penalties on the client. This outcome was a testament to our understanding of how to approach voluntary disclosures.
Conclusion
This highlights why you always want to come from a position of ‘all tax affairs are now up to date’. You want to ensure you leverage expertise in managing complex tax issues by using a specialist in the area.
The voluntary disclosure allowed Limited Company X to continue its operations without the burden of HMRC penalties. Demonstrating the importance of accurate record-keeping and timely tax management.
We always recommend having tax protection insurance in place. MJ Kane is partnered with Vantage for tax cover. All clients of MJ Kane receive automatic cover. For further information on how MJ Kane & Co. can assist your business with Voluntary Disclosures or HMRC Enquiries, please contact us.
