Option A: Disclosing income via an HMRC Campaign
Undeclared income guide
HMRC run ‘campaigns’ to encourage individuals in certain areas or business sectors to disclose undeclared, or under-declared income. A list of current campaigns can be found on the Gov.uk website.
Campaigns have included plumbers, electrician and e-trading, for example, see here for details. Campaigns have specific targets, but you may be able to disclose other sources of income on similar terms, though you will normally be directed to the Voluntary Disclosure Helpline to do so.
Under a campaign disclosure facility, you will be expected to calculate the income, tax, interest and penalties due. There will be assistance in the disclosure pack to help you do this. Penalties are likely to be up to 20% of the tax owing. This compares to the maximum penalty level which HMRC can impose in cases of deliberate and concealed error of up to 100% of the tax underpaid.
So the advantage of disclosing via a campaign is that this will usually result in lower penalties. The other side of the coin is that failure to disclose in response to an HMRC campaign is likely to mean much higher penalties and potentially prosecution – if HMRC finds out about you later.
HMRC campaigns may be time limited. The format is an initial response from the taxpayer outlining that you wish to use the facility with a promise to provide full details and pay the tax due before a set deadline. Once the deadline is passed, HMRC will pro-actively look for people in that business sector or geographical area who have not made a disclosure, but should have done.