Penalty Voluntary Disclosure Crypto

HMRC insisting that my clients Voluntary Disclosure was 'prompted'

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Client suddenly realised that he had not reported Crypto gains in his 2021/22 tax return, a week ago, and told me. A Voluntary Disclosure was made within a few days including  interest and the penalty  based on Unprompted Careless error of 30% reduced to 0% for the quality of disclosure, providing all the information, 

HMRC rejected the offer because the penalty included was NIL, saying that the disclosure was Prompted, because they had been sending emails to taxpayers reminding them to report their Crypto gains, and even if the taxpayer was not sent an email, HMRC are saying that there has been lots of press about Crypto, so they still want a minimum of 15% ( Penalty range being 30%  possibly reduced to 15%)

Client didn't get an email ( Nov23 onwards) han't read or heard of any other sort of  adverts, social media notifications

Does anyone have experience of this, How can HMRC prove the decision to disclose was 'prompted'

Grateful for your thoughts

 

Replies (22)

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By Paul Crowley
15th Apr 2024 15:30

The prompted comment is rubbish. Chances are the writer is winging it. How did he suddenly figure it out?
HMRC want a penalty, surely they could suggest a better reason.

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Replying to Paul Crowley:
By cathyne
15th Apr 2024 15:38

My thoughts also,

Just to clarify when you say 'writer'
Do you mean, Me, HMRC, or the client?

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Replying to cathyne:
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By Paul Crowley
15th Apr 2024 15:50

HMRC person.

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By David Ex
15th Apr 2024 17:02

https://www.gov.uk/hmrc-internal-manuals/compliance-handbook/ch82421

“A national campaign highlighting an area of the trading community on which HMRC will be concentrating would not stop a disclosure from being unprompted.”

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Replying to David Ex:
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By More unearned luck
15th Apr 2024 17:28

But that doesn't necessarily make it a prompted disclosure either. As CH82421 says the test is objective. If the taxpayer credibly says that he or she didn't receive any emails and HMRC can't demonstrate that they sent any to the taxpayer, then it seems to have been an unprompted disclosure. From what the OP says, HMRC are not asserting that there has been any sort of advertising campaign. Giving a prompt to taxpayer A can't amount to a prompt being given to taxpayer B.

The cheap option, OP, is to compromise. Accept HMRC's assertion, on a without prejudice basis, if the penalty is suspended, with a short period as possible of suspension, if you can trust your client to keep his/her nose clean for the suspension period.

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Replying to More unearned luck:
By cathyne
15th Apr 2024 17:47

Thankyou. I have been dithering, and considering whether to request suspension of the penalty, rather than enter into a potentially protracted negotiation as to the level

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Replying to More unearned luck:
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By David Ex
15th Apr 2024 17:51

More unearned luck wrote:

But that doesn't necessarily make it a prompted disclosure either.

No but some ammunition against the suggestion that the mere existence of an HMRC campaign might constitute notice which appears to be HMRC’s argument in the case of the OP’s client.

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By More unearned luck
15th Apr 2024 17:42

Is

“A national campaign highlighting an area of the trading community on which HMRC will be concentrating would not stop a disclosure from being unprompted.”

a sensible policy to adopt if you want miscreant taxpayers to voluntarily come forward? If you put the miscreants off, either the tax etc is never collected or you spend much time conducting enquires before it is, the increased penalties might not cover the cost of the investigation.

Have HMRC got the balance right?

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Replying to More unearned luck:
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By Tax Dragon
16th Apr 2024 06:04

Have you counted the negatives in that quote correctly?

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Replying to Tax Dragon:
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By More unearned luck
16th Apr 2024 11:42

ah.

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Replying to Tax Dragon:
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By More unearned luck
16th Apr 2024 11:42

ah.

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By rmillaree
15th Apr 2024 19:10

Ref 0% - is it not 10% to 30% MINIMUM for unprompted disclosure over 12 months after tax was due ?

https://www.gov.uk/government/publications/compliance-checks-penalties-f...

ref your specific question i agree with you and not hmrc - so would confirm client was not aware so your opinion is they are talking nonsense and request second opinion if they disagree - that is on the basis the reality is this was unprompted !!! - persoanlly i would be ready to complain straight away about any hmrc officer ovetsepping the mark. You could ring and speak to another officer in that team to seek their opinion i have always found most of them have no inerest in overstepping the mark here

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Replying to rmillaree:
By cathyne
15th Apr 2024 20:19

Crikey- You are right. Thankyou

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By taxdigital
15th Apr 2024 19:37

The law to start with: A disclosure is “unprompted” if made at a time when the person making it has no reason to believe that HMRC have discovered or are about to discover the inaccuracy (Para 9(2)(a) Sch 24 FA 2007).

Going by what OP says it’s clear, from the taxpayer’s side, it’s indeed an unprompted disclosure. That means it’s now for HMRC to prove that the disclosure was made pursuant to a prompt from their side.

HMRC did run a campaign against crypto assets, using ‘nudge’ letters. However, can such general awareness campaigns (or could be press releases tomorrow!) be treated as a ‘prompt’? No, unless HMRC have information that there was inaccuracy associated with the tax return filed by the individual in question, there couldn’t have been a prompt. In other words, it ought to be person specific, and HMRC ought to prove that they did indeed send out a prompt to the taxpayer in question as noted in this case Christopher Diball v HMRC TC/2022/11554.
https://www.bailii.org/cgi-bin/format.cgi?doc=/uk/cases/UKFTT/TC/2023/TC...(MR)+AND+(CHRISTOPHER)+AND+(DIBALL)

Turning to e-mail communications: when did HMRC start communicating through e-mails? Even after you have made a disclosure, HMRC don’t send out e-mails up until you (and the client) have formally accepted all sorts of risks associated with e-mail communications. So, that argument fails miserably.

So, go ahead and do pick up a fight: you have nothing to lose.

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Replying to taxdigital:
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By FactChecker
15th Apr 2024 19:54

"So, go ahead and do pick up a fight: you have nothing to lose" ... except your patience and potentially sanity given the ineptitude within HMRC for timely replies.

And OP, don't ignore the excellent point made by rmillaree (15th Apr 2024 at 19:10) above regarding the 'penalty range' being 10% to 30% 'for Unprompted - 12 months or more after tax was due' ... not zero and by no means always the range minimum.
This isn't much more 'generous' than the 20% to 30% 'for Prompted - 12 months or more after tax was due'.
If you are determined on the penalty being reduced to zero, then your only hope is an acceptable RE ... which doesn't sound likely in this case.

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By raycad
17th Apr 2024 11:33

I may have been living under a rock but how, Pray, does HMRC come by a taxpayer's email address???

As an aside, I would love it if we could indeed interact with HMRC by email but, apart from very limited circumstances, e.g a serious tax investigation, we are never given the opportunity.

That apart, I am in full agreement with other posters that a National Campaign does not qualify as "prompted" in the context of the penalties regime, otherwise there would be zero incentive in coming forward, would there?

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Replying to raycad:
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By rmillaree
17th Apr 2024 14:47

I may have been living under a rock but how, Pray, does HMRC come by a taxpayer's email address???

its genrally on most registrations with hmrc now - it may not be mandatory but i suspect recently registered people have handed over email.

Note if you setup pta that will probablyu include entering email as will using gatewway to pay so lots of ways and means for hmrc to collate data.

Note the email box has existed fro many years in tehn "about client page" in old skool agent area - so easy to update formally addy linked to sa acount that takes 30 seconds max if you are in there.

"As an aside, I would love it if we could indeed interact with HMRC by email but, apart from very limited circumstances, e.g a serious tax investigation, we are never given the opportunity."

thats strange most departments are starting to use email as long as you agree caveat that you known and accept the risks - bit ridiculous email is still on trial i must admit !

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Replying to rmillaree:
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By raycad
18th Apr 2024 15:01

(Responding to R Millaree)

But guess what. Only two of my clients have a PTA. They (rather sensibly IMO) take the view that they have engaged a tax agent to deal with their tax affairs. A bit of the "you don't get a dog and bark yourself" principle!

Yes, once one has engaged with an HMRC Unit who themselves have an email address (some of them don't) one does have the option of agreeing the email caveat etc. But that is not the position from the outset and certainly not for "routine" matters (more's the pity).

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Replying to raycad:
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By Hazel Accounts
24th Apr 2024 23:29

I get emails from HMRC as a tax payer to me personally addressed (not in my capacity as an agent) as somewhere a while ago I opted out of paper communications - so they email me (personally addressed not generic). Mostly it says log into my account to read a new message such as my annual tax summary or a notice to file a tax return - i don't really read them TBH as it's all standard stuff but I assume if I was on some list they could also email me a "nudge" type letter.
The emails are from "noreply@...." so unfortunately not a two way communication, but I can see how they may have someone's email.

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Replying to Hazel Accounts:
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By raycad
25th Apr 2024 23:49

Responding to Hazel Accounts:

Yes, I also opted out of paper communications in my capacity as a tax agent and hence receive emails of the "noreply@" variety. For example re my HMRC AML registration or because I have signed up for a webinar and so forth. But those are purely on account of my Agent interaction with HMRC. My SA Notice to file, which is in my capacity as a taxpayer, still arrives by post.

My point was/is that HMRC would not ordinarily be in possession of a TAXPAYER'S email address; and certainly not on any sort of scale for targeted "Nudge" campaigns. (And if so-called Nudge campaigns are not targeted then what is the point of them?)

As far as I am aware less then 5% of my clients have a PTA and that's the only way that I can see HMRC having their email address.

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By cathyne
30th Apr 2024 16:50

Update on Penalty. After taking advice from contributors, I did stick to my guns, and obtained HMRC's agreement that the disclosure was indeed 'Unprompted' and settled on a penalty reduced to 3%. My client wanted closure so we did not seek a suspension.
So thanks very much

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Replying to cathyne:
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By Paul Crowley
30th Apr 2024 17:04

Much appreciated.
Result.

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