HMRC’s digital crusade continues unabated, with the latest addition to the tax authority’s digital first administration, the Digital Disclosure Service (DDS), launching in April this year.
HMRC has said the aim of the DDS will include a number of features for those who are disclosing, including a mechanism where they can upload documents for the taxman to see digitally. This, said HMRC, will eliminate the need to send them by post.
The DDS also seems to be the latest ploy in HMRC’s ongoing mission to interact with taxpayers more directly, leapfrogging agents. “The DDS will calculate the omitted tax and late payment interest; this should help reduce the need for tax advice for low income groups”, said Rebecca Busfield, partner at Watt Busfield tax investigations.
Reacting in a blog to the DDS's impending introduction, accountancy firm Ormerod Rutter took a cautionary tone: “According to HMRC, one of the benefits of using the DDS is that it removes the need for taxpayers to seek advice and help from their accountant, allowing them to disclose by themselves if they so choose – but this might not be the best way forward”.
Busfield agreed with Ormerod Rutter's caution. Cases where the circumstances or facts are complex and may need more explanation should avoid the DDS, she explained. “HMRC will expect a full disclosure of all irregularities, and it is important to make sure that taxpayers take care and have checked their records to make sure their disclosure is accurate and complete.
“HMRC will check the disclosure with third parties or against results of other businesses in the area to make sure it appears reasonable.”
An important caveat is that the DDS will not give immunity from prosecution for serious tax fraud, unlike the contractual disclosure facility (CDF) option.
Clients using the DDS also risk missing out on available tax reliefs and, said Busfield, “widening the scope of the investigation too far.
“Given the cutbacks to HMRC resources”, Busfield continued, “it may be difficult for users to access appropriately trained HMRC staff, and it likely that taxpayers will have questions about using the service.”
HMRC will also be launching a separate disclosure facility for disclosures related to offshore income and gains.