Worldwide Disclosure Facility and the Requirement to Correct
On 5 September 2016, HMRC released details for the long awaited disclosure facility, called the Worldwide Disclosure Facility (WDF). This is mooted to be the last of the last chances offered by HMRC for individuals to become compliant by reporting previously unreported income and gains.
The ‘facility’
We initially read the HMRC document to understand the beneficial terms offered to individuals as an incentive to come forward and bring their affairs up to date. Indeed, this was very much an industry expectation. However, no mention of reduced penalties and shorter reporting periods was forthcoming. The terms of the facility are not really terms of a facility at all. HMRC state that to participate:
- you must be eligible
- you must make a full disclosure of all previously undisclosed UK tax liabilities
- you must calculate interest and penalties based on the existing legislation
The ‘facility’ is available until 30 September 2018 when new sanctions will be introduced under the Requirement to Correct initiative. It appears to be a case of, not stick and carrot, but rather stick and bigger stick. The WDF also has a shorter disclosure window then previous facilities, with the full disclosure being due for submission within 90 days of acknowledgement from HMRC that you have been registered for the facility. Taxpayers would be advised to ensure that all the relevant paperwork is ready prior to registration so they can meet the deadline. However, the risk of delaying registration for the facility is that HMRC may in the meantime open an enquiry into their affairs at which point higher penalties would apply.
The ‘bigger stick’ HMRC have is the Common Reporting Standard whereby there will be an automatic exchange of information between an extensive list of countries. By October 2018, HMRC believe they will have enough information such that the offer of beneficial terms to encourage voluntary disclosure will not be necessary. The increase in information available to HMRC, including the beneficial ownership of offshore trusts and companies, means that HMRC intend to take a tougher stance and is currently consulting with industry representatives on this changed approach:
“In light of the huge increases in information available, our approach is changing. The government has signalled its ambition to be tougher on those with offshore compliance issues. This consultation focuses on two key areas within the government’s approach: disclosure and increasing the severity of sanctions.” (From: Tackling offshore tax evasion: a requirement to correct)
The likely outcomes of this consultation are increased penalties, and possible criminal penalties for evasion of UK or overseas taxes. The consultation is also considering civil sanctions for those who enable offshore evasion. Another proposal is a new criminal offence for corporates who fail to prevent their representatives from facilitating tax evasion.
What to do now
Engage an adviser, and prepare a report as soon as possible in order to ensure compliance before 30 September 2018. Individuals with offshore structures and income or gains that may have been omitted from UK tax filings should come forward as soon as possible. It may be best to collate all the information required for a disclosure before registering for the facility.
Get In Touch
Naturally we would be happy to help with preparing and submitting disclosures to HMRC under the Worldwide Disclosure Facility in any situations that require this. If you have any friends, contacts or clients needing to make a disclosure, this really is their last chance! Please do get in touch.
Yours, Janet Paterson, FCA, CTA, TEP Director
Disclaimer
The information provided by Charter Tax Consulting Limited is general in nature and does not constitute specific tax advice. Professional advice should be sought before deciding on a course of action, or refraining from a certain action, arising from the above information. Tax legislation changes regularly and information contained herein is provided based on legislation as at 6 September 2016.
Taxation planning concerns the application of complex statute and case law to future events. Accordingly, however expert the opinion given, it is always possible that the Courts will take a different view of the application of the law. We undertake to apply reasonable care and skill in the provision of advice. We do not guarantee that tax planning steps will in all circumstances achieve a certain legal effect.
