Navigating tax with confidence
At Ward Williams we understand the challenges of navigating the intricacies of tax. In today’s everevolving regulatory landscape, it’s no easy feat.
Whether it’s the lack of awareness about tax implications, calculation conundrums, accidentally overlooking income sources, missed filing deadlines or simply feeling lost in the labyrinth of complex tax laws, unintentional mistakes can happen.
While some cases may involve deliberate tax evasion, more often than not, tax irregularities stem from unintentional oversights or misunderstandings. And that’s where HMRC’s Digital Disclosure Service (DDS) is a game changer.
In the following sections we’ll outline the DDS process, benefits and how our tax advisers will give you a sense of clarity, confidence and a straight-forward approach to navigating the DDS process.
The Digital Disclosure Service
Overview
The Digital Disclosure Service (DDS) is a HMRC initiative which provides an opportunity for individuals, companies and trustees to voluntarily disclose and rectify any overlooked tax. Think of it as a fresh start for your tax affairs.
By taking a proactive approach and embracing the opportunity to come forward to address any tax irregularities, you can often benefit from more favourable settlement terms than if the irregularities were discovered during an HMRC enquiry.
DIDYOUKNOW?
HMRCencourages voluntarydisclosure andmayviewit favourablywhen determining penalties.
HMRCCampaigns
HMRCoperatesseveral campaignsundertheDDSto helptaxpayerscorrecttheir taxaffairs,inabroadereffort toencouragevoluntary complianceandensurethat alltaxpayersmeettheir obligations.
Twonotablecampaigns include:
LetPropertyCampaign: aimedatlandlordswhohave undeclaredrentalincome andcapitalgains.
WorldwideDisclosure Facility: intendedforindividuals and/orcompanieswith offshoreincome,gainsor assetsthathavenotbeen declaredtoHMRC.
Trusteesresponsibleforundeclaredincome, chargeablegainsorcapitaleventsresultingin taxshortfalls
Taxpayerswhohaveidentifiederrorsin previoustaxsubmissions
Trustees
Please note that VAT-related errors cannot be disclosed through the DDS.
Penalties and interest
When using the DDS you will still face penalties and interest charges. However, voluntary disclosure often results in more favourable treatment.
The factors affecting the level of penalties can be: Reason for underpayment How long the tax has been outstanding
Your co-operation with HMRC.
Tailoredtoyourneeds:
TheDDSallowsyoutoaddressallrelevanttaxtypesinoneprocess.
Howtomakeadisclosure
Individuals,companiesandtrusteescanfollowthisprocess:
5 SIMPLE STEPS
Contact HMRC to advise of the intention to make a disclosure. Notify
Gather all relevant information and report all income, gains, tax and duties not previously disclosed. Disclose
Make a formal Settlement Offer. Settle
Pay the Settlement Offer to HMRC. Pay
Assist HMRC should further information or explanation be required. Accept
InitiatingtheprocessbeginswithnotifyingHMRCofyour intentiontomakeadisclosure.Thisisdoneviatheonline DDSportal.Atthisstage,you'resimplyinformingHMRCof yourintent-there'snoneedtoprovidedetailsof undisclosedincomeortaxduejustyet.
It's important to note that each individual or entity requires a separate disclosure. This means you'll need to make a separate notification to HMRC for each party involved in the disclosure.
If you've made a notification but later find a disclosure isn't necessary, you must inform HMRC promptly.
OnceHMRCreceivesyournotification,they'llsendan automatedlettercontainingtwocrucialreferences:
ADisclosureReferenceNumber(DRN)forall futurecommunicationaboutyourdisclosure
PaymentReferenceNumber(PRN)forsettling youroffer
You have 90 days from when HMRC accepts the notification to submit your full disclosure.
STEP Disclose
The disclosure phase can only begin after you've received your DRN. From the date HMRC acknowledges your notification, you have 90 days to submit your full disclosure. Your disclosure should include:
Details of undisclosed income
Tax due on that income
Late payment statutory interest
Tax-geared penalties
The time period your disclosure needs to cover depends on your circumstances.
If you have taken reasonable care: a maximum of 4 years.
If careless behaviour is evident: a maximum of 6 years.
In cases of deliberate action: a maximum of 20 years.
Penalties are calculated as a percentage of the additional tax owed.
They fall into two categories:
Penalties for inaccuracies in tax returns
Penalties for failure to notify
The penalty rate varies based on circumstances and behaviour. Voluntary disclosures often result in lower penalties.
For offshore income and gains, penalties depend on the category of the offshore territory involved.
Your disclosure must include an accurate calculation of penalties. HMRC may reject disclosures if they believe the wrong penalty has been applied.
Finally, you must declare that your disclosure is correct and complete in all respects - a crucial element of the process.
HMRC can charge penalties of up to:
100% 200% of the tax liability for an offshore liability. of the tax liability if the income or capital gain arose in the UK.
Aspartofyourdisclosure,you'llmakeaSettlementOfferto clearalloutstandingliabilities.ThisOffershouldcover:
Alloutstandingtax
Accruedstatutoryinterest
Applicablepenalties
OnceHMRCacceptsyourOffer,itcreatesalegallybinding contractbetweenyouandHMRC.
PaymentshouldbemadeusingyourPRNwhenyousubmit yourdisclosure.It'simperativetobothdiscloseandpay within90daysofHMRC'sacknowledgementofyour notification.
HMRCtypicallyexpectsfullpaymentoftheSettlement Offeratthetimeofdisclosure.Ifyoucan'tpayinfull,you mustarrangeatime-to-payagreementbeforethepayment deadline.Withoutsuchanarrangement,HMRCwilltake stepstorecovertheamountowed.
How we can help
Our experienced and qualified team of tax advisers can guide you through the DDS process, providing an efficient and high level service.
We will:
Carry out a full review of your tax affairs to determine any undeclared income to be disclosed
Identify the extent of your exposure
Register your intention to disclose under the DDS
Prepare and file your disclosure, mitigating your liability to the penalties charged
Calculate the Settlement Offer
Liaise with HMRC on your behalf
For more information or to arrange a consultation, get in touch with one of our tax advisers.
Information for users:
The matters discussed in this guide are by necessity brief and comprise summations and introductions to the subject referred to The content of this guide should not be considered by any reader to be a substitute for proper professional advice All information is accurate at the time of going to print (May 2024) Ward Williams accepts no responsibility for any loss arising from any action taken or not taken by anyone using this guide
A partner you can trust
At Ward Williams we understand that every client is unique, with their own set of financial needs and aspirations. That's why we take the time to get to know you and your long-term objectives.
Our team of experienced tax professionals will work closely with you to develop a tailored solution that addresses your specific challenges and opportunities.
Ward Williams is a member of the Institute of Chartered Accountants in England and Wales. As Chartered Accountants you can be confident that we have the specialist knowledge to assist you with your affairs.
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