ONSHORE AND OFFSHORE DISCLOSURES TO HMRC

The Autumn 2025 Budget confirmed that HMRC would continue to have investment to facilitate their increased focus on compliance and reporting obligations. This means it is more important than ever to demonstrate full transparency in relation to your tax affairs – this includes both onshore and offshore matters.

The expectation is you take a proactive approach to identifying and correcting any errors or omissions in historic tax years, however, with HMRC’s increasingly data driven and compliance-focused approach, it is essential.

HMRC offer several ways to disclose errors or omissions, so it is key to ensure that you have a full understanding of the process and associated implications.

There are slightly different methods available for onshore and offshore disclosures. A UK disclosure typically arises where UK-based income or gains have not been fully reported to HMRC. Some of the more common examples include undeclared rental income, inaccuracies in business profits, or incorrect claims for reliefs.

Disclosures of this nature are usually reported using HMRC’s Digital Disclosure Service, which allows taxpayers to bring these matters forward voluntarily. In our experience, early and unprompted disclosure significantly reduces exposure to penalties. Should HMRC identify any error or underreporting then this does give rise to much higher penalties. By proactively informing HMRC and being fully cooperative, penalties can often be mitigated to a much lower level.

Offshore disclosures of income or gains are generally more complex and higher risk. Penalties for offshore non-compliance can also be substantially higher than for onshore matters, particularly where jurisdictions are classified as non-cooperative.

HMRC have made it clear that offshore non-compliance remains a key priority, supported by increased information exchange between tax authorities worldwide. This means that UK taxpayers with overseas bank accounts, PROSPERITY NEWSLETTER investment portfolios, or property holdings are far more visible to HMRC than ever before.

For offshore matters, HMRC operates the Worldwide Disclosure Facility (WDF). This is the principal route for disclosing historic tax issues involving non-UK income and/or assets.

Both of the above disclosure processes involve notifying HMRC of the intention to disclose, followed by detailed reporting to quantify tax, interest, and penalties. While this can feel daunting, structured and early engagement with HMRC typically leads to a more favourable outcome. Importantly, HMRC also distinguishes between deliberate evasion and genuine error, so full transparency and cooperation are critical in demonstrating the latter.

A key message for anyone who thinks they may have made an error or under-reported income and/or gains, is that timing really matters. HMRC receive large volumes of data from both UK and overseas institutions, and once an enquiry has been opened, the opportunity to make a voluntary disclosure and benefit from reduced penalties is significantly curtailed.

Our team here at Albert Goodman have extensive experience of dealing with and negotiating both UK and worldwide income disclosures, so please do get in touch if you are concerned that any of the above may impact you. Early and proactive advice will not only be beneficial financially, but also gives you peace of mind.