Tax disclosures and investigations

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Our tax disclosure team at FWJ

No other firm in England has such a unique blend of skill set as our tax defence team.

• Andy Lynch is a partner whose experience prior to joining FWJ included 18 years at HMRC working for their National Tax Investigations Team. He has undertaken significant amounts of tax investigation and disclosure work for the last 30 years.
• Stephen Downie is a partner with significant tax experience and is also a qualified accountant and previously spent time working at the Insolvency Service.
• Pembe Ramadan previously spent 6 years at HMRC as an in house litigator. Pembe is a qualified Civil and Commercial Mediator and has attended over 60 First Tier Tax Tribunals during her career.
• Anita Sharma who is highly experienced in HMRC claims, often involving complex tax litigation, disclosure and investigation work, Account Freezing Orders, and dealing with matters in the Tax Tribunal.
• Phoebe Pexton who specialises in a range of cases, such as tax investigations, Code of Practice claims, disclosure work and R&D tax credit defence.

Fantastic firm, nothing was to much trouble. Direct to the point, so helpful would recommend to anyone, I would definitely use them again.

A client that we defended from an HMRC claim

Tax disclosures

Disclosure of any arrangement that may, directly or indirectly, reduce the tax payable to HMRC is essential to avoid the potential consequences of HMRC finding out for themselves.  Disclosure facilities, such as DOTAs (Disclosure of Tax Avoidance Schemes) are designed to encourage their use, with the benefits that come from be publicly compliant and, essentially, “coming clean”.

Alternatively, disclosure is an excellent method to seek validation of a scheme, rather than entering into it with the hope that it is legitimate.

A voluntary disclosure to HMRC can be made in a variety of ways. e.g. using HMRC’s Digital Disclosure Service. The Digital Disclosure Service is for disclosure of non-payment of

• income tax;
• capital gains tax;
• national insurance contributions; and
• corporation tax.

Our team can help

Our tax dispute team at Francis Wilks & Jones have successful helped many clients resolve their issues with HMRC through the voluntary disclosure facility. We can guide you through the process and if it is right for you – make sure you do it properly and avoid paying any more than you have to.

Examples of HMRC’s disclosure facility include

1. Worldwide disclosure facility

On 5 September 2016, HMRC announced the launch of a worldwide disclosure facility.

• this allows disclosure online by notifying HMRC of an error and how the mistake arose;
• the process allows for calculation of how much tax is payable to HMRC and what interest and penalties will also be applied;
• it encourages an agreement with HMRC surrounding the payment of unpaid taxes.

Disclosure through this worldwide disclosure facility process is for a UK tax liability that relates wholly or in part to an offshore issue.

2. Contractual disclosure facility

The contractual disclosure facility allows disclosure by those who have deliberately failed to pay tax.

• an individual can either make a disclosure voluntarily at any point or alternatively, following a letter from HMRC;
• HMRC will write to individuals that they suspect are guilty of committing tax fraud and offer a contract through the contractual disclosure facility;
• this facility is for individuals suspected of tax fraud and not companies.

Advice should be taken surrounding whether contractual disclosure scheme is the right option.

Where disclosure is made through the scheme and where an agreement is reached within the timescales set by HMRC, it will agree not to pursue a criminal investigation in respect of the disclosed conduct.

If an agreement is not reached with HMRC through the contractual disclosure facility, HMRC may begin a criminal investigation in to the conduct concerned.

What are the benefits of using disclosure to HMRC?

Voluntary disclosure, whether by the contractual disclosure facility or the worldwide disclosure facility, will often result in lower penalties than those applied as a result of a HMRC enquiry.

In addition, HMRC tend not to pursue criminal prosecutions where a voluntary disclosure has been made, although there is no guarantee on this and the terms of each disclosure scheme will need to be considered carefully. Finally, disclosure assists to bring tax affairs up to date and to give the tax payer the peace of mind that this brings.

Investigations by HMRC

HMRC may initiate an investigation surrounding non-payment of a business’s taxes. Tax compliance checks are common.

The investigation may be focused on corporation tax, VAT inspections, income tax and capital gains tax.

• an investigation may follow an unusual return (for example, a small company makes an unusually large claim for VAT) or it may follow persistent late filing of returns, inconsistencies in returns or the business being in a sector that HMRC has decided to target;
• a business should work with their accountant and respond to HMRC’s enquiries;
• accountants will be used to dealing with HMRC enquiries and be able to provide advice and assist in relation to the enquiries.

The outcome of the investigation might be that HMRC declare that tax has been over or under paid by the business. Alternatively, it might be that HMRC find that there has been deliberate wrong doing on the part of the tax payer.

Where there has been wrongdoing, we recommend the early engagement of solicitors. If a business is aware of wrong doing, it is sensible to obtain legal advice during HMRC’s investigations. 

Offshore customers & Pandora Papers

In an HMRC press release dated 12 June 2023, HMRC gave offshore customers the chance to “come clean” and correct their tax affairs. It follows the massive leak of data from the Pandora Papers. HMRC is writing to UK residents named in the files of 14 offshore financial service providers. These providers specialise in companies, trusts and foundations in low, or no tax, jurisdictions.

What are the Pandora Papers?

The release of the Pandora Papers during 2021 and 2022 sent out global shockwaves and involved the leaking  of over 11 million documents which exposed the hidden wealth of politicians, celebrities, high-net-worth individuals, and revealed the extent of offshore tax evasion in many jurisdictions.

How are HMRC dealing with this?

HMRC has spent the last few years examining the papers and reviewing them against the tax records of UK tax payers named therein. From 5^th June 2023 HMRC have started sending ‘Nudge letters’ to individuals who they suspect may have a disclosure to make as a result of what they have discovered.

What are nudge letters?

In the context of the Pandora Papers, HMRC are using “nudge letters” as a tool to encourage UK tax payers to disclose any issues of tax evasion and/or offshore holdings exposed by the leaked documents, and get them to review their positions to ensure compliance.

I received a letter, what do I need to do?

HMRC began sending letters out on 5 June, typically allowing 30 days to respond

• DO NOT IGNORE THE LETTER. HMRC will not be going away if they have written to you;
• REVIEW YOUR AFFAIRS. It is vital that you review your affairs during this time and respond as requested;
• TAKE LEGAL ADVICE. Taking expert legal advice early can save huge amounts of time and money later on. Saying the wrong thing without legal advice (even with the best of intentions) can seriously prejudice your position and may even lead you to end up paying more;
• SPEAK TO OUR EXPERT ANDY LYNCH. Andy is a Partner in our tax dispute team – and prior to working for FWJ he spent 18 years working for the HMRC tax investigation team. He has the expert knowledge you need to deal with HMRC enquiries.

I have a disclosure to make, what do I do?

You should seek our professional help, especially if you consider you have a disclosure to make. Depending on your circumstances it may possible to make a disclosure under the worldwide disclosure facility, and in the more serious cases under Code of Practice 8 and Code of Practice 9.

The team at FWJ has exceptional experience in this area and can assist you put your affairs in order.

Call us today – free initial consultation

Speak to one of our team team today for help. Or alternatively ring Partners Andy Lynch or Pembe Ramadan for immediate assistance.

FWJ did precisely what it set out to do. I am extremely grateful for its assistance.

A client who had received a Request for Security from HMRC for a sum that would have caused their company severe financial difficulties. We helped them to have the entire bill withdrawn

Andy Lynch at FWJ was literally a life saver for me. I ran in to some tax issues with HMRC and I suffer from mental health issues as well so I was a complex case. Andy took his time to professionally and accurately layout my case and assist me with finding a resolution. I researched a lot of tax advisers before making my decision and I am glad I did and relieved that I chose Andy and FWJ.

Chris Kitchen