Who Needs To Make a Disclosure
Anyone whose tax or Vat returns have contained errors, whether deliberate or not, may need to make a disclosure to HMR&C to mitigate the eventual cost and in some serious cases to avoid the possibility of criminal prosecution.
At times HMR&C offers amnesties in the form of Disclosure Opportunities and full advantage of these should be taken if you have some undisclosed liabilities.
However it is possible to make voluntary disclosures at any time and in addition to being able to deal with Disclosure Opportunities Cobham Murphy’s expert tax team can represent you through the voluntary disclosure process to ensure the best possible outcome.
Failure to Make a Disclosure
HMR&C nowadays have very sophisticated intelligence gathering systems and in addition to that share information with over 150 other countries around the globe, including most of the traditional tax sheltering jurisdictions.
If you have previously undisclosed liabilities and decide not to reveal them, H M Revenue & Customs (HMR&C) may well unearth your information during their general work to target tax evasion. Not only will there be liability at your highest rate of tax but interest and penalties will be charged as well. The penalties can be up to 100% of the liability or up to a maximum of 200% where there is offshore related income. In more serious cases, there is always the possibility of a criminal prosecution.
Types of Tax That Can be Disclosed
Disclosure by companies and individuals, including individuals within a partnership, and Trustees can be made in respect of all taxes and duties but the following are the most common:-
- Income Tax
- Tax Credits
- Capital Gains Tax
- National Insurance Contributions
- Corporation Tax
- Stamp Duty Land Tax
How to Make a Disclosure
If there is a current Disclosure Opportunity then HMR&C will have established the parameters to be used and that will normally begin with an online form to be completed and submitted.
If you need to make a voluntary disclosure and instruct Cobham Murphy to assist we would in the first instant contact HMR&C to give an indication that a Disclosure needed to be made. At this point it would not be necessary to provide details of the undisclosed income or the amount of tax that might be involved. However, this information will need to be provided within ninety days of receiving any acknowledgement from HMR&C.
HMR&C would normally expect the liability to be paid at this time, however, if instalment arrangements are needed these can be discussed with HMR&C.
Preparation of the Disclosure
The additional liabilities will need to be calculated, together with interest and penalties, and in some circumstances HMR&C can go back up to 20 years.
The actual computation of liability will depend on the nature of your disclosure but in addition to companies and individuals other organisations and societies such as social clubs, golf clubs, investment clubs etc. will also need computations if they have disclosures to make.
e would prepare detailed computations and research your tax affairs generally to establish whether there were any unclaimed reliefs or set offs that could be available to reduce your overall liability.
Income Received In the Current Tax Year or the Previous Year
Taxable income relating to these years would not normally be included within the Disclosure. If a Disclosure is being made because you are a ‘ghost’ a self-assessment registration will need to be made and the income for the current or previous year would be shown on a Tax Return. If a Tax Return has already been completed in respect of the previous year then an amendment can be made within twelve months of the statutory filing date.
How Many Years Need To Be Included In The Disclosure?
This is dependent upon the culpability of the error. A decision has to be made concerning the type of error, which would be expected to fall within the following categories:-
- having taken reasonable care
- because you were careless
- because it was deliberate
Years to Be Included Within a Disclosure
- where reasonable care has been taken – 4 years
- if the error can be regarded as careless – 6 years
- if an error is established to be deliberate – 20 years
Failure to Notify Chargeability
If you are an individual or an individual within a partnership, the latest that you should have notified HMR&C that you started in business is 5 October in the second year that the business has operated.
For a company, HMR&C will issue a Registration Form shortly after the company has registered with Companies’ House. If that Form is not received then a company has three months of it becoming active to register. If notification has not been made within the specified periods of time then a Disclosure should be made.
Disclosures of VAT matters can be made but specific criteria needs to be applied. There are some distinct ongoing protocols for certain VAT Disclosures and our VAT experts can assist if they are in point.
The level of penalties is something of a moveable feast and will almost inevitably require negotiation. HMR&C will without doubt present the strictest interpretation of the law as it relates to the facts but they are rarely objective and Cobham Murphy can help ensure that only reasonable appropriate penalties are applied.
The Role of Cobham Murphy Limited
Cobham Murphy’s tax and VAT investigation teams is very experienced dealing with all aspects of matters examined by HMR&C. They have assisted very many companies and individuals achieve the best possible outcomes in investigation and audit situations and have a reputation for battling hard to ensure equitable treatment for their clients.
Disclosures can be made on your behalf if appropriate and we can usually bring added benefit to all HMR&C investigation scenarios for our clients and also on a consultancy basis for clients of other accountancy firms and solicitors.
If you have the need to make a disclosure or are already subject to a difficult or troublesome tax investigation or intervention Cobham Murphy is here to help you.