In early September HMRC announced the opening of a Worldwide Disclosure Facility (WDF). This disclosure facility is billed as the last opportunity for individuals who have not yet regularised their tax situation with the UK tax authorities (HMRC) to do so now before information under the Common Reporting Standard (CRS) starts to flow into the hands of HMRC in the course of next year, 2017. It is widely expected that HMRC will be adopting a tough stance when pursuing individuals as a result of information received under CRS.
WDF is open to individuals who wish to disclose a UK tax liability relating to ‘an offshore issue’ which is defined as unpaid or omitted tax arising from:
> Non-UK source income;
> Assets located or held outside the UK;
> Anything having effect as income, assets or activity of a kind described in the two points above; or
> Funds connected to unpaid tax transferred outside the UK.
The opportunity to disclose can be by the individual of their own tax affairs or on behalf of another, for example a tax advisor, the tax affairs of the individual’s own company or LLP.
The procedure requires notice of intention to make a WDF disclosure to be filed on the HMRC Digital Disclosure Service (DDS). The notice of intention to file must be filed as soon as an individual becomes aware that tax is owed on undeclared income or capital gains that are held offshore. The notice must be provided together with certain other information including the individual’s NI number and tax number.
On receipt of the basic information in the DDS System, HMRC will issue an acknowledgement and from that date the individual has 90 days to make full disclosure together with a calculation of the interest and penalties due on the previously undisclosed funds. The unpaid tax with the self-calculated interest and penalties must be paid in full when the full disclosure is submitted to HMRC within the 90 day time limit. HMRC has the discretion to accept later payment if the WDF applicant is unable to pay immediately.
Should HMRC consider or suspect that the funds comprise in whole or in part criminal property, the application to participate in the WDF can be rejected.
HMRC is making it clear that this is the last opportunity being offered to individuals with undeclared offshore funds, to make voluntary disclosure. It is worth noting that its terms are less favourable that the disclosure facilities that have gone before.
Providing full disclosure is made and the requirements of the facility are met, HMRC will not seek to impose a greater sanction. There are exceptions, in particular if the individual is already under investigation or the disclosure relates to an earlier incomplete or inaccurate disclosure or the incorrect calculation of the penalties. In such cases HMRC will seek to impose higher penalties.
It should not be assumed that making the disclosure and the appropriate payments in full will resolve all matters as HMRC has the residual right to bring criminal prosecution, but only in circumstances where only criminal prosecution is appropriate or where a strong deterrent must be established.
HMRC has also announced that after 30 September 2018 new and more severe sanctions will be introduced to bolster the harder line that HMRC will be taking in the future.
If you require advice or assistance to ensure that your tax affairs are in good order, Rosemont will be pleased to help.