Voluntary tax disclosure, as the name suggests, is the opportunity given to tax payers in the United Kingdom to come forward of their own free will to disclose any tax discrepancies faced by them. The disclosure can be made to the Customer Relationship Manager (CRM), local compliance, or any other appropriate office of the HMRC. An individual can take the help of a tax advisor or a specialist for guidance during the disclosure procedure.
While disclosing any form of tax results in a financial cost to the individual or company in question, opting for voluntary tax disclosure often has several advantages as compared to one disclosed following an intimation from the HMRC. The identification of the tax discrepancies has been categorized into ‘prompted’ (HMRC discovered) and ‘unprompted’ (voluntary) tax disclosures based on which the penalty schemes have also been decided. In case of an unprompted tax disclosure, a person can expect to avail the following benefits –
1. Lower penalties
The HMRC has been rewarding those coming forward for voluntary tax disclosures since the change in penalty schemes in the year 2009.
2. More control
The individuals or companies that voluntarily disclose their tax errors have more control over their actions and company activities as compared to those who have been contacted by the HMRC to come forward with the tax frauds/evasions.
Companies or individuals who disclose their tax errors on their own have a higher edge when it comes to negotiating for penalties with the HMRC.
While it is true that no one likes to admit their own mistakes, it is also a fact that it is better to be safe than sorry. Thus if you during one of your audits, or any other activities, come across details of taxation faults, then it is advisable for you to get in touch with your tax advisor and get the matter to the HMRC’s notice in order to prevent being accused of a deliberate attempt of tax fraud and concealing.