Managing your business’s finances can be extremely difficult, and there are numerous opportunities to make inadvertent tax report errors. Business owners and managers who don’t want to end up with a headache in managing finances should run to Cheap Accountants in London to get the job done.
If there comes a time when you realise you did not pay the correct tax in the previous filing or sometime in the past, what would you do? Would you just let it pass even if you know it’s wrong? Is there anything you could do to rectify the situation? Definitely!
This article will walk you through the process of making HMRC voluntary disclosure to rectify your tax error and settle any underpayment without getting any sanctions. Read through the following guide to know how to do it.
HMRC Voluntary Disclosure Defined
Voluntary disclosure is the process laid out by the HMRC for individuals to rectify the correct tax amount they should pay for a particular period. The additional tax payment calculated after filing this process should be settled within 90 days.
Income tax, capital gains tax, national insurance contributions, and corporation tax are all covered by HMRC voluntary disclosure program.
Cheap Accountants In London provides a comprehensive range of accounting services, including corporate taxation, auditing, landlord tax returns, business start-up, payroll, and self-assessment tax returns.
The Procedure for Submitting an HMRC Voluntary Disclosure
1. Use the Digital Disclosure Service (DDS)
Once you realise that you owe tax to the government, immediately notify HMRC that you will make a disclosure. DDS is the HMRC system where you and other individuals and businesses can update the institution that you made a mistake in your filed tax payment.
2. Get Your Disclosure Reference Number (DRN) and Payment Reference Number (PRN)
After filling in the DDS form, HMRC will give you a DRN and PRN that you will use to pay for the calculated unpaid tax. Disclosure and payment should be made within 90 days after receiving an acknowledgement notification from HMRC.
3. Prepare Your Disclosure
Calculate the total income you must disclose to rectify the erroneous one and determine the tax you need to pay based on that income. The tax rate you will be paying depends on the income that you earn beyond your Personal Allowance.
In calculating your actual income, you don’t have to include what you have already declared. The number of years to include in your disclosure depends on where the error lies and when you should have reported the income to HMRC.
When rectifying your tax, you should offer to pay your outstanding tax balance. It should be enclosed with the HMRC’s acceptance letter to formally create a legal contract between you and the institution.
4. Pay HMRC
Send your payment along with your disclosure. Indicate your PRN to make the payment transaction. HMRC should receive your payment within the 90-day payment period stipulated on the letter of acknowledgment sent to you.
5. Wait for the HMRC Acknowledgment Receipt
After submitting your disclosure and payment, HMRC will send you formal notification of their action towards your disclosure. If HMRC is satisfied with your disclosure, an acknowledgment receipt would be sent your way within two weeks. Otherwise, HMRC will contact you and will impose a penalty for underpayment.
Filing for tax correction to HMRC involves more than paying what you owe without fines. Criminal prosecution and hefty penalty charges await those who will be caught red-handed. Ultimately, tax evasion can ruin your business image, leading to losing many, if not all, your customers.