Whether you are self-employed or run your own business, managing taxes can be daunting. Occasionally mistakes can happen, but fortunately HMRC allow you an opportunity to rectify any mistakes through a voluntary disclosure.

This article explains all you need to know about voluntary disclosure and what it means for you as a taxpayer.

What is HMRC Voluntary Disclosure?

HMRC voluntary disclosure allows business and individuals to report tax underpayments and bring payments up to date. This process helps reduce penalties and avoids HMRC taking legal action. HMRC are usually more lenient with voluntary disclosures compared with how they deal with prompted disclosures.

Voluntary disclosures are usually made through the Digital Disclosure Service (DDS). The DDS helps you report undeclared taxes in a simple way.

Types of Voluntary Disclosures

Several voluntary disclosure options are available depending on your situation:

  • Worldwide Disclosure Facility (WDF): For unreported offshore income or assets.
  • Contractual Disclosure Facility (CDF): For cases involving tax fraud.
  • Let Property Campaign: For landlords with underpaid tax on rental income.
  • Other tax campaigns: Target specific sectors like construction or buy-to-let property.

What Taxes does the DDS cover?

Businesses and individuals can use the DDS to make a voluntary disclosure about:

  • Corporation Tax
  • Income Tax
  • National Insurance Contributions
  • Capital Gains Tax

What are the Benefits of a Voluntary Disclosure?

There are many benefits of informing HMRC of any issues in your tax submissions. Below are the key voluntary disclosure benefits:

  • Penalties are lower when you disclose before a tax investigation begins.
  • Voluntary disclosure helps you avoid criminal prosecution.
  • You may have the opportunity to negotiate a better settlement.
  • Resolving tax issues brings peace of mind, allowing you to focus on your business.

How to Make a Voluntary Disclosure

HMRC accepts many disclosures online. It is important to seek specialist advice on what is most suitable for your circumstances.  Herer is a step-by-step guide to making a voluntary disclosure:

  1. Notify HMRC you want to make a voluntary disclosure.
  2. Tel HMRC what went wrong and why omissions or mistakes were made.
  3. Calculate the unpaid taxes, interest, and penalties.
  4. Let HMRC check the voluntary disclosure.
  5. Reach a formal agreement with HMRC.

Conclusion

The HMRC voluntary disclosure process can be complex. It is important to seek specialist advice on which process is best for your circumstances. If you believe that you have either accidentally or deliberately paid the wrong amount of tax as a business or individual, please contact us for more information

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