It turns out to be really stressful when you find out something wrong with the details of tax returns. However, the act of voluntary disclosure or any other way of declaring your unpaid tax details to HMRC will keep you away from any kind of penalties. Moreover, the management of the business finances works best when you are doing it with honesty. You might be associated with carrying out your business activities or you are a self-employed individual, dealing with tax implications is often found stressful for many of us. The chances of mistakes in the tax returns are possible too occasionally for all of us.
If you are the one who is worried about unintentional mistakes in your tax returns, we have designed this guide that will help to keep your finances smooth and error-free. We have compiled all the necessary detail of what is voluntary disclosure, what are the important uses of voluntary disclosure when is the right time to do it, and what happens after you disclose the tax details to HMRC. Let us kick off with an explanation.
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Why Should You do Voluntary Disclosure?
You are required to provide the detail of your income to HMRC. The information must have the factor of transparency. As per HMRC the clients are up for the right kind of tax returns and pay the correct amount in tax. However, there are several cases that make the companies and owners pay less than what is actually required from them. This happens because of unintentional mistakes in tax returns.
With the use of voluntary disclosure, you get an opportunity to inform HMRC about the mistake and rectify it in the possible time frame. This will keep you away from the penalties and fines as well. The payment and the relevant details will be up to date as well. There is DDG which is known as the digital disclosure service, this is a platform that helps to make the declaration of any such detail and rectify the mistakes. This works with national insurance contribution, corporation tax, capital gains tax, and income tax. You can take a period of three months to pay any other additional taxes.
What is the Use of Voluntary Disclosure?
When you are found to be the one who has made a deliberate change in the tax returns information, this can possibly put you in serious circumstances. HMRC will soon be aware of the wrong details of the information. This will make you pay the penalties and you will end up paying more than what is required from you. Your business will suffer from damage by the end of such a journey of mistakes.
As discussed earlier that one of the important requirements for businesses and individuals is the details of financial information. This is important for HMRC to maintain a record that correct taxes are being paid. This should be according to the set rules of the current legislation as well. Due to a little error in the tax returns, one will end up paying the wrong amount of tax. This could be an overpayment or underpayment of tax. If such an experience happens with any self-employed individual or with a business, the first thing to do is to use the medium of voluntary disclosure to disclose the mistakes to HMRC.
Moreover, the way of HMRC handles this is way more lenient than in other cases. HMRC gives no margin when the mistakes are figured out through other means. The use of voluntary disclosure includes the following:
- You can keep yourself away from hefty fines and criminal prosecution.
- You have a chance to work out clean to rectify your tax mistakes.
- You will not be involved in any penalty case of tax evasion.
When is the Right Time to Make the Voluntary Disclosure
As discussed earlier that one of the important requirements from businesses and individuals is the details of financial information. This is important for HMRC to maintain a record that correct taxes are being paid. This should be according to the set rules of the current legislation as well. Due to a little error in the tax returns, one will end up paying the wrong amount of tax. This could be an overpayment or underpayment of tax. If such an experience happens with any self-employed individual or with a business, the first thing to do is to use the medium of voluntary disclosure to disclose the mistakes to HMRC.
What Happens After HMRC Gets Notified of your Disclosure?
After you are done with making the disclosure and HMRC finds it good enough with complete information, the chances are that HMRC will accept it. You will be notified of the acknowledgement within a period of two weeks. If your disclosure is not accepted, you will get notified by HMRC. If there are huge mistakes in the disclosure, you will have to deal with heavy fines.
The Bottom Line
Now that you have gathered a fair amount of information about voluntary disclosure, we can bring the discussion towards wrapping up. After the realisation of mistakes in your tax returns, opting for voluntary disclosure is the first thing to do. This will help your business to be away from the penalties and hefty fines. We hope these few minutes of reading have helped you better understand voluntary disclosure and how it is beneficial in the UK.
VAT rules on voluntary disclosure become tricky when you have a higher chance of making an error in your returns. Our professional and detail-oriented accountants can help you! Get in touch with us.
Disclaimer: All the information provided in this article on voluntary disclosure in the UK, including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice in this regard.