Disclosure route review
We establish whether the issue belongs in DDS, WDF, the Let Property Campaign, CDF, a tax return or another correction mechanism.
A tax disclosure is not simply a calculation of unpaid tax. The correct disclosure route, years in scope, taxpayer behaviour, interest, penalties and whether HMRC has already made contact can all affect how the matter should be presented.
We start by deciding how the irregularity should legally be corrected. An undeclared rental property, offshore investment account, company omission, capital gain, deliberate suppression of income and an amendable recent tax return should not automatically be pushed through the same disclosure process.
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Before calculating tax, the adviser should establish the correct correction or disclosure route, whether HMRC has already made relevant contact and what behaviour caused the original failure.
A disclosure can fail procedurally even where the arithmetic is right if the wrong route is used. Recent amendable returns, residential letting, offshore matters, deliberate behaviour and VAT errors can each require a different correction or disclosure process.
The engagement can begin before HMRC is notified or after HMRC has already written to the taxpayer and the disclosure is therefore potentially prompted.
We establish whether the issue belongs in DDS, WDF, the Let Property Campaign, CDF, a tax return or another correction mechanism.
The relevant look-back period is considered from the type of failure, behaviour and whether the issue involves offshore matters.
Income, gains, expenses, allowances and tax already paid are reconstructed for each relevant year.
Late-payment interest is calculated from the appropriate original due dates through to the expected payment date.
Prompted or unprompted status, behaviour and quality of disclosure are considered when determining the penalty position.
The final disclosure, calculations, explanation and formal offer are prepared consistently with the selected HMRC route.
The disclosure is built in stages so that HMRC is notified correctly, the liability is reconstructed from evidence and the final submission remains internally consistent.
We identify the income, gain, tax, years and circumstances behind the omission or error.
Where formal notification is needed, the correct HMRC disclosure procedure is selected before detailed calculations are submitted.
Tax, interest and penalties are calculated from available records, with reasonable estimates documented where records genuinely cannot be recovered.
The disclosure, explanation and formal offer are filed and the payment or agreed payment arrangement is dealt with within the applicable deadline.
HMRC's current guidance specifically requires taxpayers to consider the available disclosure routes and use the one that fits the liability. The Digital Disclosure Service is not a universal correction mechanism.
The general DDS can cover relevant Income Tax, Capital Gains Tax, Inheritance Tax, Corporation Tax, National Insurance and ATED liabilities.
Where an individual's only undeclared income is from residential letting, HMRC directs the taxpayer to the specialist Let Property Campaign.
Offshore income, assets or gains requiring disclosure should generally be routed through the Worldwide Disclosure Facility.
Where deliberate behaviour has caused a tax loss, the CDF is the HMRC route that can provide the specified criminal-investigation assurance where its contractual conditions are met.
VAT errors are not disclosed through the general Digital Disclosure Service. Current HMRC guidance directs businesses to the VAT correction rules, including adjustment on a VAT return where permitted or the appropriate formal VAT error notification where it is not.
HMRC's current guidance explains the disclosure routes, taxes covered by DDS and circumstances in which another route should be used.
Official disclosure guidance ↗Where deliberate behaviour caused a tax loss, HMRC provides a separate CDF procedure under Code of Practice 9.
Official CDF guidance ↗Penalty treatment is not determined only by the amount of tax owed. HMRC considers the behaviour that caused the failure, whether the disclosure was prompted and the quality of the taxpayer's cooperation.
It is usually better to determine prompted or unprompted status from the actual chronology rather than from the taxpayer's preferred label. HMRC treats the test objectively. A disclosure made after HMRC contact is not automatically prompted in every possible circumstance, but the facts need careful review.
HMRC's Compliance Handbook explains the objective test used to distinguish the two categories.
HMRC penalty guidance ↗The applicable range depends on behaviour, whether the disclosure is prompted and, for some liabilities, whether offshore rules apply.
HMRC penalty ranges ↗These pages cover the narrower investigation, disclosure and appeal procedures that sit beneath the wider HMRC Support service.
The appropriate answer depends heavily on what was omitted, why it happened and whether HMRC has already made relevant contact.
Where tax has been underpaid, addressing the issue before HMRC discovers it can affect the prompted or unprompted classification and can produce a more favourable penalty position. The correct disclosure route should still be identified first.
It is HMRC's general online disclosure process for specified liabilities including Income Tax, Capital Gains Tax, Inheritance Tax, Corporation Tax, National Insurance and ATED. It is not the correct route for every tax irregularity.
For the general Digital Disclosure Service, HMRC currently requires the disclosure and payment, or an agreed payment arrangement, within 90 days of the notification acknowledgement.
The chronology needs to be reviewed. Relevant prior HMRC contact may mean the disclosure is prompted, and in some cases a disclosure facility may no longer be the correct way to deal with the matter.
If an individual's only undeclared income is residential letting income, HMRC directs taxpayers to the Let Property Campaign. Other property or wider tax issues can require a different route.
Where the disclosure involves offshore income, assets or gains, HMRC generally directs taxpayers to the Worldwide Disclosure Facility. Offshore liabilities can also have different time-limit and penalty rules.
No. HMRC's current guidance states that VAT errors cannot be disclosed through the general Digital Disclosure Service. The appropriate VAT correction or notification process should be used instead.
Deliberate behaviour needs particular care. HMRC's Contractual Disclosure Facility is the disclosure route that provides a specified assurance against criminal investigation for deliberate behaviour fully and honestly disclosed under its contractual terms.