The Digital Disclosure Service (DDS) is HMRC’s online service which allows for voluntary tax disclosures. How could you benefit from using the HMRC DDS to correct your tax affairs?

What is the DDS?

The DDS is a HMRC disclosure service designed to allow you to bring your tax affairs up to date where mistakes have been made or things have been missed in the past. The DDS allows you to make full disclosure of any unpaid tax, under settlement terms which are often more preferable than if irregularities were discovered as part of a HMRC enquiry. The DDS is just one of the disclosure services that HMRC operates, which also includes the Worldwide Disclosure Facility and the Contractual Disclosure Facility.

Who can use the DDS?

The DDS is available to those who wish to correct their tax affairs. This includes those who’ve received a HMRC ‘nudge’ letter and have been prompted to make a disclosure.The HMRC DDS is open to individuals, companies, and trustees for disclosures of Income Tax, National Insurance Contributions, Capital Gains Tax and Corporation Tax. A separate disclosure would need to be made for each individual or entity.

Why disclose under the DDS?

Where there are tax irregularities that require correcting, being proactive is the best thing you can do. By coming forward and making an unprompted disclosure to HMRC, you’ll receive a significantly lower penalty than if HMRC were to write to you first.Whether you believe you need to make an unprompted disclosure, or because HMRC have contacted you, making a full and complete disclosure will also provide you assurance that, following its acceptance, HMRC won’t open an enquiry to check the risk it sees present.If you’ve received a ‘nudge’ letter, then it’s likely that HMRC has information to suggest that there are errors in your tax affairs. You shouldn’t ignore this letter – if you do, HMRC may open an enquiry. It’ll often be quicker and more cost-effective to ensure your affairs have been reviewed by tax experts, who can let you know if you need to take any corrective action, and how best to mitigate any penalties which may be due.

How far back do I need to disclose?

The number of years that require correcting will depend on several factors, particularly where errors have occurred over a number of years. While our team of experts will be able to provide bespoke advice that is specific to your case, it’ll always be necessary to consider the behaviour that led to the irregularities in your tax affairs and whether you were registered for Self-Assessment in the relevant tax year. HMRC’s powers to raise assessments are restricted by the time limits set out in legislation. It’s vital that your disclosure presents all the tax liabilities that HMRC remains in time to collect (as set by statute). This could be as many as 20 years or as few as four tax years. Where a disclosure doesn’t present all the assessable tax liabilities, HMRC may well open an investigation and seek to recover additional tax and higher penalties.

Penalties and how to reduce them

In all cases where irregularities are identified, HMRC is obliged to consider charging financial penalties. When contemplating penalties, HMRC will consider the underlying behaviour, whether you came forward voluntarily, and the quality of your eventual disclosure. The penalties are charged as a percentage of the original understatement of tax. Buzzacott has a long-established and proven track record of ensuring that our clients receive the minimum financial penalty allowed by law. For many clients, this means that they don’t pay a penalty at all.

What is the DDS process?

1. Registration - this notifies HMRC that you intend to make a disclosure. At this stage, you don’t need to give any details of the undisclosed income or tax you believe you owe.

2. Disclosure - your disclosure must be submitted within 90 days of HMRC confirming your registration. This isn’t a statutory deadline and if more time is needed due to the matter being complicated, or information being sought to assist in the disclosure, HMRC will generally agree to an extension.

3. Payment - this must be made at the time of submission unless a time to pay arrangement has been agreed with HMRC.

How can we help?

Our award-winning Tax Investigations and Dispute Resolution team can guide you through the DDS process and provide you with bespoke advice tailored to your specific requirements. Our specialists will:

• Conduct a full review of your tax affairs, identifying any issues that need to be disclosed, providing you with an initial view as to the extent of your exposure

• Where appropriate, register you for the Digital Disclosure Service process

• Prepare and submit your disclosure that ensures you don’t pay any unnecessary tax, interest or penalties

• If needed, negotiate a time to pay arrangement that is affordable according to your needs and personal circumstances.