HMRC Voluntary Disclosures

Why it pays to come forward first

Undeclared income happens for all sorts of reasons. Mainly because taxpayers simply do not realise some of their income sources are taxable. You may have inherited rental property or a small portfolio of shares and were not sure on how to declare the income, or have money or assets held overseas that have been forgotten about or did not know needed to be reported in the UK. HMRC is clear that if you have made money you need to pay tax on and have not told them about it, you should tell them as soon as possible.

If you contact HMRC before they contact you, they may consider your case more favourably. Leaving it, on the other hand, can end up costing you far more. If foreign income in particular goes unreported, HMRC states you may have to pay both the undeclared tax and a penalty worth up to double the tax you owe. In the most serious cases you can be prosecuted for giving false information about the tax you owe.

Which HMRC disclosure route applies to you

HMRC has multiple routes for taxpayers to make disclosures through. The right one will depend on where your income or gain came from and the reason for not declaring at the time. Sherwin Currid can help you work out which applies to you before making contact with HMRC.

Digital Disclosure Service (DDS) – the general route for telling HMRC about underpaid tax from previous years, covering onshore and offshore income or gains you have not previously declared.

Worldwide Disclosure Facility (WDF) – for taxpayers needing to disclose a UK tax liability that relates wholly or partly to an offshore issue, such as income or assets earnt and held outside the UK.

Let Property Campaign – for individual landlords with undisclosed rental income, whether that is a single property, a portfolio, a room let above the Rent a Room Scheme threshold, or a holiday let.

Cryptoasset disclosures – for anyone with unpaid tax on exchange tokens, NFTs or other cryptoassets.

Contractual Disclosure Facility (CDF) – used under Code of Practice 9 in the more serious cases where HMRC suspects deliberate tax fraud.

How many years of undeclared income you may need to disclose

If you have not yet registered for Self Assessment and simply want to bring your affairs up to date, HMRC allows you to register and declare undeclared income from the last 4 years in a simple manner. Sherwin Currid can help you with the registration and completing the self-assessments, ensuring that you reach a conclusion quickly.

Where a formal disclosure may be necessary, such as the Let Property Campaign or a cryptoasset disclosure, the number of years HMRC expects you to go back will depend on the reasons that income was not declared originally. Both the Let Property Campaign guidance and the cryptoasset disclosure guidance set out the same three bands:

4 years if you registered for Self Assessment on time and took reasonable care but still paid too little tax.

6 years if you registered on time but did not take reasonable care with your tax affairs.

Up to 20 years if you failed to notify HMRC deliberately, or deliberately paid too little tax.

Working out which band applies to you really matters, since it determines how many years of income and gains you need to calculate and pay tax on. We can help you with this, as well as ensuring that communications with HMRC remain open and honest to ensure the best outcome.

Penalties for making a disclosure

Making a disclosure will usually include tax, interest and a penalty. HMRC calculates the penalty as a percentage of the tax you should have paid, what HMRC calls the potential lost revenue. The percentage depends on your behaviour and on whether your disclosure is unprompted or prompted (. HMRC’s penalty factsheet for failure to notify sets out the ranges:

Non-deliberate, within 12 months of tax being due – 0% to 30% if you come forward unprompted, rising to 10% to 30% if HMRC prompts you first.

Non-deliberate, 12 months or more after tax was due – 10% to 30% unprompted, or 20% to 30% prompted.

Deliberate – 20% to 70% unprompted, or 35% to 70% prompted.

Deliberate and concealed – 30% to 100% unprompted, or 50% to 100% prompted.

Coming forward before HMRC contacts you, and cooperating fully throughout, helps keep any penalties as low as possible. Using a professional accountant can ensure that all income and liabilities are correctly calculated and communicated to HMRC, reducing the risk of HMRC finding issue with your disclosure.

What happens if HMRC contacts you first

If HMRC writes to you first, it is worth taking early professional advice before you respond. Promptly and accurately dealing with the early stages of a request from HMRC is vital in ensuring a smooth process to disclosing your income. Sherwin Currid can help you collate your records and one of our accountants will be able to talk you through your options so that you may proceed with clarity.

Where HMRC suspects deliberate fraud, they may offer you a contract under the Contractual Disclosure Facility. You will then have 60 days to decide whether to accept. Accepting, and making a full and honest disclosure of your deliberate behaviour, is the only way HMRC guarantees it will not pursue a criminal investigation into that behaviour, although civil penalties can still apply.

How Sherwin Currid can help

Making a disclosure to HMRC can feel daunting, particularly if you are not sure how much you owe or how far back you need to go.

Our team can work through your situation with you in confidence, helping you identify the correct disclosure route and gather the information HMRC will expect to see. Your dedicated accountant will calculate what is due, prepare and submit the disclosure on your behalf.

Where appropriate, we can also correspond with HMRC directly so that you do not have to, giving you peace of mind that your disclosure is being handled correctly from start to finish.

Every client works with their own dedicated accountant, who will take the time to understand your circumstances before recommending how best to proceed.

Get in touch with us today to discuss how we can help you.

Frequently asked questions

What counts as undeclared income?

Undeclared income is any taxable income or gain you have not reported to HMRC, including income from renting out property, capital gains from selling property, shares or valuable items, self-employment or side income, and income or gains from overseas sources or cryptoassets.

How far back can HMRC ask me to go?

This depends on your behaviour. If you suspect that you have undeclared income please reach out to discuss with one of our team who will be able to advise you on the period for which you should make a disclosure for.

Will I be prosecuted for undeclared income?

Most voluntary disclosures are dealt with as civil matters resulting in tax, interest and a penalty. HMRC has confirmed that criminal investigations are reserved for the more serious cases, and that a complete, unprompted disclosure is looked upon more favourably than waiting to be found out.

Can my accountant deal with HMRC on my behalf?

Yes. With your authorisation, we can notify HMRC of your intention to disclose, correspond with them throughout, and submit the disclosure for you.

What if I cannot pay what I owe straight away?

You are expected to pay in full when you submit most disclosures, but if that is not possible, HMRC’s guidance says you should contact them before you submit your disclosure to discuss a payment arrangement. We can help you have this conversation.

How do I get started?

Get in touch for a free, confidential conversation about your situation, and we will be happy to help. We will listen, explain your options in plain English, and agree the next steps with you before anything is sent to HMRC.