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HMRC internal manual

Compliance Handbook

Offshore matters: requirement to correct certain offshore tax non-compliance: failure to correct – penalties - reductions for quality of disclosure - telling

You must check the date from which these rules apply for the tax or duty you are dealing with. See CH123050 for full details.

Telling includes

  • admitting that there is offshore tax non-compliance that has not been corrected,
  • disclosing the extent of the non-compliance in full,
  • explaining how and why the non-compliance arose.

What is important for the telling of the disclosure is the

  • timing,
  • nature,
  • extent.

How to apply these is explained below.

Note: You need to weigh up all of these factors in considering the overall reduction for the telling element of the disclosure.

There are no restrictions on how the person can make a disclosure. The person can tell you by phone, in person, by letter, by submitting a return or providing an amended return.

Timing of telling

The timing of the telling is the first of the three points to be considered when arriving at the reduction for telling. The second is the nature and the third is the extent.

General approach to timing of telling

Normally the maximum reduction for the timing of telling is only earned if all the telling occurs immediately after the opportunity to tell begins.

Maximum reduction for the timing of telling will not normally be earned if the taxpayer, having received notice of the start of a compliance check, delays making a disclosure. For example, waiting until we arrive to check his business records or until he receives a request for information etc. Each such case should be considered on its merits and the type of compliance check involved.

The reduction will decrease proportionately throughout the period when a disclosure can be made. So if a person doesn’t make a disclosure until the end of a compliance check, they can expect a low reduction for the timing of the telling.

Nature of telling

The nature of the telling is the second of the three points to be considered when arriving at the reduction for telling. The first is the timing, and the third is the extent.

The nature of the telling covers why the failure to correct occurred.

To qualify for a full reduction, the person needs to show a positive approach to telling us what has happened. This involves more than just reacting to our questions.

Extent of telling

The extent of the telling is the third of the three points to be considered when arriving at the reduction for telling. The first is the timing and the second is the nature.

The extent of the telling is whether everything is disclosed to us. If the person makes only a partial disclosure then a full reduction will not be due. There is an overlap here with ‘helping’, a disclosure that makes no reference to the scale of the failure to correct is not a complete disclosure.

When the person tells you about a failure to correct they must tell you all the facts at that time. If they do not, they may not receive the full reduction.

However, in a very complex case it may be difficult for the person to know the full extent of the failure when they start to tell us about it. It will still be possible for them to receive the maximum reduction for telling, but only if it was clear that the person was disclosing all they could remember at the time and made all efforts within a reasonable time to complete the telling.

In addition, to gain the full reduction for the quality of disclosure a person must inform HMRC of any person who acted as an enabler of the relevant offshore tax non-compliance or the failure to correct it. 

The type of information required in relation to an enabler could include

  • the name and address of the enabler,
  • a description of the enablers’ conduct that encouraged, assisted or otherwise facilitated the conduct by the individual giving rise to the penalty,
  • a description of how the first contact between the individual and the enabler was made and how contact was maintained, and
  • a description of all documents held by the individual relating to the enablers’ conduct.

If a person’s tax affairs do not involve an enabler, then by telling HMRC of that fact, they will have fulfilled this requirement.

Para 16(3)/Schedule 18 Finance Act (No 2) 2017