HMRC's launched The Worldwide Disclosure Facility in September 2016 for voluntary disclosure relating to overseas sources of income and gains. The WDF is part of a series of proposed changes to UK tax law which illustrate that the government is as committed as ever to eradicating non-compliance. As expected there are no favourable terms or amnesty.
The launch of the Worldwide Disclosure Facility (WDF) is interlinked with the Common Reporting Standard (CRS); the automatic information exchange of bank data from around the world and register of beneficial ownership.
A statutory obligation to correct mistakes or serious errors in UK tax is the subject of a separate consultation document called ‘Requirement To Correct’ which gives a strict timeframe for disclosures to be completed before 30 September 2018 to avoid new severe sanctions. This date coincides with the date on which the UK, as an early adopter of the agreement, will have been receiving information for a complete year from over 100 countries under the Common Reporting Standard concerning assets held by UK resident individuals.
Anyone who wants to disclose a UK tax liability that relates wholly or partly to an offshore issue can use the facility. An offshore issue includes unpaid or omitted tax relating to:
- Income tax, capital gains tax and inheritance tax;
- offshore matters (broadly income, gains or assets outside the UK) and offshore transfers (transfers of UK income, gains or assets out of the UK); and
- non-compliance – whether deliberate, careless or even an innocent mistake including incorrect returns, failure to submit returns and a failure to notify that a return should be issued.
There will still be tax, interest and penalties involved in making such a disclosure, but, whilst still significant, these will be minor compared to the level of penalty incurred after 30 September 2018. Any overseas income or gains which come to light after 30 September 2018 may incur a penalty of between 100 and 200% of the tax due plus 10% of the asset value.
Whilst you may still be able to appeal against the penalties levied, the grounds for doing so will be limited to situations where either HMRC has incorrectly levelled the penalty because the client has already disclosed the income, or where there is a “reasonable excuse”. It will not normally be enough to say that you either left the matter in the hands of professionals, or you thought that your affairs were up to date.
Unlike other penalties, HMRC is no longer taking account of situations where there may have been innocent error. These new penalties will be charged under most circumstances unless it’s possible to convince HMRC or the First Tier Tribunal that there was a reasonable excuse which existed throughout the period of the failure.
Accordingly, we would strongly recommend that those individuals and trustees with offshore interests who have a UK tax liability should review their tax affairs to ensure that they are fully compliant.
Please contact us for an initial review meeting to discuss specific circumstances and any disclosure requirements.