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15 September 2016
On 5 September 2016 HMRC launched the Worldwide Disclosure Facility (“WDF”).
This is a voluntary disclosure facility in relation to “offshore interests”. The WDF is linked with the launch of the Common Reporting Standard (“CRS”) which is a system of automatic exchange of bank information from around the world and registers of beneficial interest. HMRC will begin receiving information from the Crown Dependencies at the end of this month before the wider CRS takes effect on a global level between 2017 and 2018.
Registration for the WDF is via an online portal and is a streamlined process for disclosure but allows no special terms; all UK tax laws apply. This is not an “amnesty”. In this respect it differs from earlier disclosure facilities such as the widely used Lichtenstein Disclosure Facility, which had penalties limited to 10% and tax and penalties sought for only the previous 10 rather than 20 years.
Some commentators have reported that the terms of the current disclosure facility are not attractive enough to encourage individuals to take advantage of the opportunity.
HMRC may consider that they no longer need to offer incentives when they are shortly to start to receive data from over 100 countries. Many individuals may remain unaware of the extent of information which the UK Government will be receiving in relation to their personal assets overseas. HMRC will have more information than ever before to enable them to investigate people who have assets/income which have not been disclosed.
The WDF could be described as “the last chance” before harsh new sanctions start to be applied including “naming and shaming”, an increased penalty regime (HMRC are consulting on penalties up to 300%) and the risk of criminal prosecution. Whilst the WDF has no guaranteed immunity from prosecution, this is highly unlikely. High Profile individuals, those who have been investigated by HMRC previously and where this is any link to professionally intermediated evasion may be best advised to consider making a Contractual Disclosure under Code of Practice 9 (COP9) rather than utilising the WDF and should seek expert legal advice. Against this backdrop, the WDF could start to look more attractive. The WDF will run until 30 September 2018 and the full effect of global CRS will come into effect the following month.
The timeframe for utilising the WDF is quite short with only 90 days to make full disclosure. Careful planning and professional advice should be sought before making any disclosure. Whilst the use of an online portal may make the process appear deceptively simple there are a number of complex matters of tax law involved which would need professional input. The invitation to “web chat” with HMRC might be appealing to some but really should be avoided.
Anyone who is concerned that they may have underpaid tax should seek advice.
If you or your clients have any queries in relation to this article or other matters, then please let us know.