A Short Guide to: Tax Investigation – Part 2

A tax investigation is always a stressful and difficult time for any business. SMEs in particular, have fewer resources, so this can really impact the business owner’s time and key staff can be put under undue pressure when they become embroiled in a dispute with HMRC.

In our previous blog, we summarised why tax investigations occur, and what steps you could take to reduce the risks of being investigated.

In this second blog, we’ll be reviewing why a voluntary disclosure can help you avoid a tax investigation and how you can report this appropriately to HMRC.

What is a Voluntary Disclosure?

In simple terms, a voluntary disclosure occurs when a taxpayer realises that they’ve made an error in their tax reporting and discloses it to HMRC before any tax enquiry starts. Not every error requires a voluntary disclosure: if the window to amend or alter a tax return is still open it may be possible to deal with the error by filing an amended return.

HMRC did offer a variety of ‘disclosure opportunities’ for specific areas, offering enhanced terms if businesses and individuals (usually in specific sectors) disclosed historic errors to HMRC. Currently, only a couple of these opportunities remain open.

Why are Voluntary Disclosures useful?

Making a voluntary disclosure usually means that penalty charges will be significantly lower, than if HMRC had investigated and discovered the problem in the first place. Usually, HMRC will be more lenient with resolving voluntary disclosures, for example giving the offending company a longer window to solve the problem or requesting that fewer years are corrected.

How can I make a voluntary disclosure?

There are two ways to report voluntary disclosures.

1. Direct taxes must be reported via the Digital Disclosure Service.
2. Other taxes must be reported in writing to HMRC.

You must inform HMRC of your intent to make a disclosure and then have 90 days to make your disclosure and calculate the liability, which will form your settlement offer.

All information in a voluntary disclosure must be complete and accurate. If not, HMRC may see this as deliberate tax evasion which could result in harsher penalties.

Therefore, we always recommend that you employ a specialist to advise you to make the disclosure.

What happens after I submit my disclosure?

Once you submit your disclosure, your business will receive an acknowledgement from HMRC typically within two weeks. The waiting game then starts – it can take several months for HMRC to review your application and accept, question or reject it.

Once accepted, Wilson Partners will work with you to swiftly finalise any settlement and close the case.

If you want to find out more about how we can specifically support Voluntary Disclosures, visit our page, or get in touch with one of our specialist tax investigation consultants.

Visit our tax enquiries and investigation information pages

Read our blog A Short Guide to: Tax Investigation – Part 1