Honesty with HMRC pays

Many of you will have read about recent “disclosure opportunities” provided by HM Revenue and Customs for those with offshore accounts and, more recently, medical practitioners. Whilst not amnesties as such, they have offered a “reduced” penalty of 10%, to be paid on top of the tax owing and interest back to the date that the liability should have been paid.
 
But what should those that fall outside the qualifying criteria of these disclosure opportunities do, if they realise that they have made a mistake or have omitted an income or gains source from an earlier year’s Tax Return, and have thus underpaid tax?
 
Whilst it may be tempting to think that HMRC may never find out, their ability to use information obtained from external sources and cross check with amounts returned by individuals and businesses improves year on year.
 
The penalties for non-compliance are also targeted now at those who deliberately conceal an omission – whereas those who make a careless mistake then subsequently make an unprompted disclosure to correct the matter may well face no penalty at all.
 
Anyone who does not make a voluntary disclosure of underpaid tax also risks having a formal enquiry opened into their tax affairs - and if HMRC discover that under-declarations arose because of a failure to notify liability, they can go back for up to 20 years.
 
In addition to the extra tax and interest payable, if HMRC spot any omission first, penalties of up to 100% of the tax owing could be charged.
 
So the message is, at the end of the day, simple – making a voluntary, unprompted disclosure at any time will put you in a far better position than being caught out – and allow you to sleep peacefully at night.
 
If you have any questions about the best way to deal with such a matter, please contact Anne Wright

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