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So, you’ve made a mistake in your HMRC submission – now what? Having the correct information on the documents you submit is crucial, but mistakes can and do happen. However, the question does arise: if, as a self-employed individual, you realise there’s an error, should you disclose it to HMRC voluntarily?

In this article, we’re taking a look at what voluntary disclosure is and the benefits of doing it as soon as you realise something’s not right.

What is Voluntary Disclosure?

Simply put, voluntary disclosure means choosing to let HMRC know about an error or a non-compliant activity without being asked about it or without facing an investigation. This allows you to rectify things, which can also help to give you peace of mind – after all, you won’t have to worry about an HMRC investigation or the stress of receiving a fine if you resolve the issue as soon as you notice it.

The Digital Disclosure Service allows you to fix mistakes with:

  • Income Tax
  • Capital Gains Tax
  • Corporation tax
  • National Insurance Contributions

In essence, it’s crucial to solve errors immediately because HMRC wants businesses to be as transparent as possible and pay the right amount of tax. Mistakes can mean that people are not paying the amount they owe, even if it’s not done on purpose, taking care of the problem will keep HMRC happy.

Who Should Voluntarily Disclose Mistakes?

Some people believe that only significant tax evasion cases should come forward and notify HMRC. However, this is not the case. Even if you noticed a small error, it’s important to disclose it in order to avoid a tax investigation among other issues.

Simply by volunteering the information, you already gain a lot of goodwill from the government, so make sure to use it to your advantage.

How Long Do You Have to Fix Errors?

If you’ve not declared all of your income, accidentally put down a wrong number or forgot a key piece of information on your return, you can use the Digital Disclosure Service to rectify your situation. Any tax that you owe will have to be calculated and paid within 90 days.

It’s important that you choose to disclose errors because HMRC may notice discrepancies in your documentation and contact you instead, which can lead to fees and penalties. It may also make HMRC more lenient if you do have to pay penalties, considering you came forward without being prompted.

How to Disclose an Issue?

When you notice a discrepancy in your submissions, be it because you forgot to add income you received or because you got a date wrong, for example, you can immediately tell HMRC that you wish to notify them of this issue.

This means making the taxman aware of all income, gains, tax, etc, that you didn’t mention before, no matter how small. Both limited companies and sole traders can use the Digital Disclosure Service form for this, after which HMRC will send you a unique Disclosure Reference Number you can use to contact the government about the process.

They’ll also provide you with a Payment Reference Number that you must use to pay the tax you owe. HMRC appreciates honesty, so it’s better to disclose any issue on your returns before they become an actual problem; once that’s done, you can move on and relax knowing everything is taken care of.

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What if You Choose Not to Disclose Submission Mistakes?

Of course, not everyone is forthcoming when it comes to notifying HMRC of errors in tax returns, which is why the government has so many measures in place to deal with tax evasion.

If companies or individuals choose to ignore the problem (or make malicious errors), HMRC is highly likely to take action -this can range from financial penalties or even criminal investigations in severe cases. The government carries out thousands of compliance checks every tax year, so there’s always a chance they’ll choose to review your records.

Voluntary disclosure helps HMRC see you as honest instead of thinking you’re fraudulent or that you’re trying to deceive the government.

There’s nothing to gain in keeping a secret and hoping HMRC won’t notice the mistakes – the government is, now more than ever, cracking down on evasion and ensuring they receive the right amount of tax. This is why legislation like IR35 and Making Tax Digital exist and are continuously updated.

If you opt not to contact HMRC voluntarily, you may have to deal with a tax investigation (which will take up time and cause stress), a fraud investigation, criminal prosecution, risk to your assets, and so much more. In fact, you may also be liable to pay up to 200% of the loss of tax, which can be a considerable amount, enough to make or break your business and lead to bankruptcy or other problems.

With the government doing all they can to and penalise people and companies, the worst thing you can do is pretend everything is all right when it isn’t. So, if you’re unsure how to properly submit your return or want a fresh – and expert – pair of eyes on it, why not speak to Gorilla Accounting?

As both sole trader accountants and limited company accountants, we can help you during tax season and ensure HMRC receives the correct information; we’ll also help you maximise your tax efficiency, so that you’re not paying more than you should.

How to Minimise the Risk of Errors in Tax Returns

While it can be hard to completely remove the possibility of errors, since mistakes can happen, there are still several ways to go about it to keep them to a minimum – or to prevent them from happening in the first place.

For example, you may want to consider hiring an accountant, as this is probably the easiest way to make sure all your tax information is correct. With Gorilla Accounting, you have your own dedicated accountant who understands the ins and outs of your business, so you can rest assured all paperwork will be filed and submitted with the utmost attention to detail.

We work with business owners in many different sectors, so we can offer help and advice to a wide range of small businesses, from IT and locum doctors to landlords and architects.

Your accountant will also ensure all documents are submitted on time as well. By doing this, HMRC is unlikely to show interest in your returns, which means avoiding an investigation; investigations are not just stressful, they’re also time-consuming and will take you away from your business.

Having proper bookkeeping software can help too. All our clients get 24/7 access to FreeAgent accounting software, a tool that provides real-time information and keeps your sensitive data safe at all times. You can view transactions, receipts, invoices and expenses whenever you want – and from any device, even where you’re on the go to keep it all organised.

Our software will make it a lot easier to submit tax returns. You’ll have all the key information in the same place, so you don’t have to search around for a specific expense or receipt and risk making a mistake. By using FreeAgent, you don’t need to worry about Making Tax Digital, since this software is approved by HMRC.

It’s also important that you review all your documents before they’re sent to HMRC. This is because you’re responsible for your returns even if you have an accountant who sends them on your behalf, so pay attention to every detail, no matter how small it is.

Benefits of Voluntary Disclosure

In short, it’s clear that there are many benefits to telling HMRC of any issues in your submissions. They include, but are not limited to, the following:

  • HMRC will rule out tax avoidance and fraud.
  • The government may be more lenient when it comes to penalties (this can mean reduced penalties, depending on your situation).
  • It’ll become obvious to HMRC that you’re not involved in illegal activities.
  • You may have the opportunity to negotiate a settlement.
  • You’ll have a better relationship with HMRC, which is always handy.
  • You won’t be bogged down by an investigation that will likely take up a lot of your time and distract you from your day-to-day tasks.
  • Your tax issues will be concluded quickly, not dragged out for months.

There’s also a chance that you won’t have to pay any penalty. If HMRC determines your mistake was not deliberate, for instance, they may opt for not charging you. This is not always the case, however, you will need to meet several conditions to qualify for this break.

We can help guide you through this process, so send us a message, and we’ll be happy to discuss your particular situation with you.

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Gorilla Accounting is Here for You

No matter how long you’ve been submitting tax returns to HMRC, mistakes can happen at any time. It’s natural to be concerned if that happens, but you have the chance to put things right, which will keep you from paying fines and penalties.

As contractor accountants, you can offer another layer of peace of mind – our expert accountants have been filing and submitting documents to HMRC on behalf of business owners across the UK for many years, so they know how to do it correctly and on time.

This is a good way of minimising the risk of having errors in your submissions. Whether you’re busy and don’t have time to look through your documents thoroughly or simply don’t want to take the chance, talk to us. We’ll manage your accounts and handle all documentation for you so that you can focus on what’s most important to you: running and growing your business.