Disclosures

Disclosing under-declared tax can be a stressful experience, particularly if the amount is substantial.

There are many ways to declare under-declared tax and we deal with the 2 most common methods.

For a voluntary disclosure, if you have deliberately under-declared tax, you have 2 options:

1. Make a standard disclosure (usually £250,000 of tax or under), or
2. Apply to HMRC to be dealt with under the Code of Practice 9 (“COP9”) procedure (over £250,000).

COP9

COP9 is a process normally commenced by HMRC to investigate suspected tax fraud, but where HMRC do not seek to prosecute the individual criminally. The idea is that HMRC avoid the substantial costs of a criminal prosecution and let you do all the hard work by calculating the liability and telling them of every tax you have under-declared.

Whilst they will normally approach the taxpayer and offer this procedure, a taxpayer can apply themselves at any time during an HMRC investigation, or even if HMRC have no knowledge of the issue.

If not already offered by HMRC, we recommend applying for this where the disclosure is over £250,000.

It is effectively a contract between the taxpayer and HMRC, where you will be required to disclose all fraudulent conduct and, in return, HMRC guarantee they will not seek to prosecute.

However, if you fail to cooperate, or materially misrepresent what has happened, then yes, an HMRC COP9 investigation can be escalated to a criminal prosecution.

There is too much detail to put all variations of disclosure on the website and we ask that you contact us so that we can tailor our advice to your specific needs. All conversations are confidential.

Penalties

The 2 headings of penalties for under-declared tax are Prompted and Unprompted. In other words, if HMRC contact you before you make the disclosure, your disclosure will fall into the prompted category.

Within those 2 headings, you will have 3 sub-categories that dictate the % of penalty HMRC will issue.

1. Deliberate and concealed (e.g. you created false documents to hide the fraud).
2. Deliberate but not concealed (e.g. you simply did not declare the correct amount)
3. Careless (e.g. you did not take sufficient care when preparing the returns and careless mistakes were made in your favour).

The more you assist with the investigation, the lower the percentage until you reach the lowest level available.

If HMRC view your conduct as deliberate, they can go back 20 years to recover any liability. For Careless it is 6 years but, if you took all reasonable care, it is 4 years.

The penalty ranges are as follows: 

Unprompted disclosure

It is possible to reduce the penalty to nil for an unprompted disclosure of a careless inaccuracy.

Prompted disclosure

For a prompted disclosure, each penalty can be reduced by up to half of the maximum penalty.

For free initial advice, please call us at the earliest opportunity on 0345 557 0005.