The letter states that this is the recipient’s “final opportunity to make a complete, accurate and honest disclosure” before HMRC calculates the tax due and charges penalties.

Action required within 30 days 

The recipient of the letter must complete HMRC’s online form within 30 days from the date of the letter, by: 

• disclosing all undeclared sales; or
• making a nil disclosure where they are confident that they have disclosed all their sales. 

HMRC will check the disclosure against the information it holds. If it agrees with the disclosure, HMRC will contact the business owner to arrange for the tax to be paid, plus interest, and will register them for any appropriate taxes (eg, VAT) if necessary. Any penalty charged can be reduced where a full and complete disclosure is made.  

If HMRC disagrees with the disclosure, it will request further information. HMRC says that it will charge penalties of up to 100% of the underpaid tax if it finds that a false disclosure has been made.  

Consequences if no action taken 

If a disclosure is not made within 30 days, HMRC will consider taking further action, including: 

• issuing an assessment of the tax due, plus interest and penalties; or
• opening an investigation into the business. This may be a criminal investigation. 

The letter sets out the action that HMRC may take where a person deliberately avoids or evades paying their tax debts and explains that a company’s debts can be transferred to its directors in some cases. 

Other options for making a disclosure 

HMRC explains that there are other options for making a disclosure, and directs the person to its guidance on electronic sales suppression. 

Depending on the circumstances, the person may wish to consider using the contractual disclosure facility (CDF). The CDF is only suitable for taxpayers who want to admit to tax fraud. By entering the CDF, the taxpayer will:  

• admit that their deliberate conduct has brought about a loss of tax;
• tell HMRC about all the tax losses brought about by their deliberate conduct;
• give as much detail as they can within 60 days of being offered the contract; and
• provide additional details, in the form of a report, following the 60-day period which includes a statement that they have given HMRC complete and accurate details of their deliberate conduct. 

In turn, HMRC will agree not to investigate with a view to bringing a criminal prosecution for the deliberate conduct the taxpayer admits to in the CDF contract. 

Further information 

• Template letter