Advice on HMRC Disclosures and Investigations

Advice on HMRC Disclosures and Investigations

Our tax team has over 20 years' experience in supporting clients through voluntary HMRC disclosures and tax investigations. We support our clients with:

• Advising on how and when you should make a disclosure
• Estimating the potential tax, interest and penalties due
• Liaising and negotiating with HMRC investigations on your behalf

When can HMRC open an investigation?

HMRC has the legal right to look into your books and records at any time. Under Self Assessment legislation, they can investigate taxpayers entirely at random.

While it's distressing to receive such a notice, HMRC does not need to provide a reason for looking into you, and they don't even need to suspect anything.

In some cases, HMRC will raise what's called an ‘aspect enquiry', which focuses on one or more parts of your tax return. In others, they may launch a full investigation into all of your tax affairs. The average length of these is around 19 months, and professional fees for managing them often exceed £5,000.

What is a voluntary disclosure?

A Voluntary HMRC disclosure allows you and/or your business to report any tax underpayments, so you can bring these up to date. By making a voluntary disclosure, you can reduce your penalties and avoid legal action from HMRC.

HMRC typically deals with voluntary disclosures more leniently compared to those prompted by an investigation.

What are the benefits of a voluntary disclosure?

There are a number of benefits to making voluntary disclosures to HMRC, including:

• Lower penalties when you voluntarily disclose before a tax investigation begins.
• Voluntary disclosure helps you avoid criminal prosecution.
• The potential opportunity to negotiate a better settlement.

If you're worried about forgetting to disclose something, or concerned about past filings, it's often best to talk to a tax specialist. Waiting for HMRC to approach you will usually cost more and lead to harsher penalties.

How far back can HMRC investigate?

It depends on the situation, but HMRC can investigate your affairs as far back as 20 years.

Normally, they have 12 months from the date you file your return to open an enquiry if they suspect an incomplete disclosure. After that, they can only investigate if the taxpayer didn’t disclose information they should have.

Typical timeframes:

• Four years for basic or innocent clerical errors
• Four years for careless VAT mistakes
• Six years for other careless mistakes
• Twelve years for offshore income, CGT or inheritance tax irregularities
• Twenty years for fraud or failure to disclose taxable income without a reasonable excuse

Even if HMRC opens an enquiry for something recent, they can expand it as it progresses. If they believe dishonesty is involved, they can look back up to 20 years.

If you’ve had undeclared income from property or side gigs for several years, a simple enquiry could turn into a lengthy investigation.

Who we help

We have helped a wide range of clients to disclose undeclared property income, foreign savings and sole trade income to HMRC.

We can walk you through the full process, talk through your concerns, and provide an estimate of the potential tax, interest and penalties due (if there are any), while handling all dealings with HMRC from registration to closure.

If you need support with a disclosure, or have already been contacted by HMRC, please contact a member of our Tax team