Complete Guide to HMRC Digital Disclosure Service (DDS) 2024

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Written by: Liez Comendador
HMRC Digital Disclosure Service

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HMRC launches disclosure campaigns to encourage taxpayers to voluntarily come forward and be upfront about their income and taxes. The latest HMRC Digital Disclosure Service (DDS) is accessible to everyone who wants to straighten their tax affairs.  

This article covers the latest digital disclosure service HMRC introduced, including the process of disclosure, penalties, taxpayers’ rights when dealing with the penalties, and other frequently asked questions around the topic.  

What Is HMRC Digital Disclosure Service?

HMRC launched the Digital Disclosure Service (DDS) to make voluntary full disclosure available for everyone, regardless of their employment status, cause of non-compliance, or the industry they belong to. This is because other currently open disclosure campaigns are limited to certain targets, such as Let Property Campaign (LPC) which only caters to property owners who earn rental income.  

If taxpayers qualify for LPC, they must follow its guidelines. Other campaigns alongside the DDS include the following:

  • Contractual Disclosure Facility (CDF) – for deliberate non-disclosure and prevention of further legal actions 
  • Coronavirus Job Retention Scheme – for employers who overclaimed CJRS grants 

This disclosure service HMRC launched as an online platform is accessible to all individuals, businesses, and trustees, giving a fair ground for everyone to sort out their tax liabilities, whether they are prompted by HMRC or not. The DDS, however, is not available for VAT matters or disclosures of any organised crimes. If it is about VAT fiscal fraud, check out our comprehensive VAT Fraud guide.  

HMRC Digital Disclosure Service

Voluntary disclosure proves to be very useful, as when HMRC themselves find any irregularities or errors in the taxpayers’ tax returns, they can go back several years and dig more in-depth into the investigations. This is also one of the most effective ways to reduce any penalties if the taxpayer is discovered to have truly erred in their previous tax affairs.  

Taxes that can be disclosed or amended via the DDS are as follows: 

  •  Income Tax 
  • Corporation Tax 
  • Capital Gains Tax (CGT) 
  • National Insurance contributions (NICs) 
  • Inheritance Tax (IHT) 
  • Annual Tax for Enveloped Dwellings (ATED) 
  •  

Why Make a Voluntary Disclosure to HMRC? 

HMRC has a lot of cues and tip-offs. Their connect computer system is also excellent at absorbing and collating information from all sources, including financial records, Companies House details, and more. However, they may not know everything immediately.  

Voluntarily disclosing incomes or potential tax return errors will spare the taxpayer possible rigorous tax compliance checks once the latter finally gets into their tax affairs. Fortunately, HMRC’s digital disclosure service is available for both who received ‘nudge letters’ or not.  

Voluntary Disclosure to HMRC

Penalties are lower when taxpayers voluntarily take part in one of the disclosure campaigns, as they position themselves on a good side with HMRC. HMRC also incentivises taxpayers’ voluntary disclosures by digging into their tax affairs less deeply than those who do not take part in the process or ignore the nudge letter.   

For the taxpayer, finally being able to sort out their tax affairs gives them peace of mind, as they do not have to worry about being caught in another future suspicion. For those who were shown to have been deliberately non-compliant or fraudulent, voluntary disclosure will also keep them out of being publicly announced by HMRC.  

What Are the Steps for HMRC Voluntary Disclosure? 

Here are how individuals and businesses can take part in the digital disclosure campaign: 

Registration 

To notify HMRC that they are about to make a disclosure, taxpayers must head to HMRC’s Digital Disclosure Service page, fill out details, indicate which tax irregularity to settle, and submit any supporting documents. If uncertain about what to disclose, it is advisable for taxpayers to contact HMRC helpline before making a disclosure. 

Once information is submitted, HMRC will provide taxpayers with a unique Disclosure Reference Number (DRN) and Payment Reference Number (PRN), indicating their intention to make a disclosure. At this stage, they are not yet required to provide details of any undisclosed income or tax owed. 

Disclosure

After HMRC acknowledges the disclosure application, the taxpayer will have 90 days to complete all necessary information, including the specific details of the irregularities they wish to disclose and calculation of the tax owed due to the said irregularities 

Calculation 

The calculation depends on the taxpayers’ situation. If it involves more previous tax years and other complicating factors, it is highly advised to seek help from tax experts. For each tax liability, they can use our calculators below: 

To ensure accurate tax payments, our experts will need to do further checks. Disclosing additional incomes, the taxpayer must include all the other income sources, such as PAYE, as income tax is not due unless their total taxable earnings go above the tax-free personal allowance. 

Formal Offer 

Once income tax returns, penalties and interest, and all the other bill calculations are done, the taxpayer must submit a formal full disclosure. This completes the disclosure process, and HMRC will be checking all information and documents.  

Payment 

The Payment Reference Number (PRN) is needed at this stage. Various payment methods are available, including debit/credit card, cheque, online banking, or bank transfer. Unless the taxpayer agrees to a time-to-pay arrangement (TTP) with HMRC, the payment must be made within the disclosure period. 

What Are the Penalties for Failing to Disclose?

HMRC imposes fines according to various factors, including the nature of the behaviour, voluntary disclosure, and the quality of the disclosure made. If the taxpayers were found to have been careless, penalties may extend up to six years. Deliberate actions to mislead HMRC can result in penalties for up to 20 years. 

Penalties for Failing to Disclose

Interest charges are also applicable on overdue tax payments, calculated daily from the due date until the payment date. Penalties vary from one individual circumstance to another, but they generally become lower when the taxpayer voluntarily discloses, and more so, if they are very cooperative with HMRC throughout the process. 

Frequently Asked Questions

The time limits depend on the taxpayer’s level of care. If the taxpayer has taken reasonable care to submit a correct return, the time limit is 4 years; reasonable care, 6 years; failure to notify liability or deliberately understated a tax bill, 20 years.

There are no strict rules on how to maintain records for as long as they are accurate, complete, and readable enough to avoid HMRC penalties. They can be kept in paper format, digitally, or using relevant software.  

The maximum penalty percentage is 30%. Unprompted disclosures may be at 0%; prompted disclosures at 15%. 

HMRC’s voluntary disclosure helpline is +44(0)300 1231078. Taxpayers may also send a letter to these addresses: Individual and Small Business Compliance Campaigns, HM Revenue & Customs, Voluntary Disclosure Team S0790, NE98 1ZZ, or Newcastle upon Tyne.  

Why Legend Financial for Your Tax Affairs? 

Using the HMRC digital disclosure service is one surefire way to settle any tax irregularities without attracting considerably higher penalties, or at all. Legend Financial is here to make your disclosure as accurate as possible so you do not pay unnecessary tax, penalties, or interest. 

To reduce your financial burdens, we will also help you reach a payment agreement with HMRC through a time-to-pay plan, which will allow you to spread payments over a certain period instead of one time. If you qualify for other currently open HMRC disclosure campaigns, we are here to guide you throughout the process, too. Talk to one of our tax experts today! 

Author

  • Junaid Usman

    Apart from being a partner at Legend Financial, Junaid is an expert on Business Tax including business management advisory services which has proven in the growth of company. He is a promising advisor with an ideology; "Any business success depends on the level of objectivity it maintains."

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Picture of Junaid Usman
Junaid Usman
Apart from being a partner at Legend Financial, Junaid is an expert on Business Tax including business management advisory services which has proven in the growth of company. He is a promising advisor with an ideology; "Any business success depends on the level of objectivity it maintains."

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