HMRC launches its flagship disclosure facility

The campaign to crack down on tax avoiders and evaders continues apace and HMRC have announced a new flagship disclosure facility, (“WDF”), which is set to commence on 5 September 2016.

Previous disclosure opportunities

HMRC takes every opportunity to encourage its customers to pay tax on undisclosed monies salted away without regard to the proper amount of tax payable thereon.  In addition to various domestic opportunities targeted at specific industries, we had the Liechtenstein Disclosure Facility (“LDF”) and The British Crown dependencies’ facilities.

Broadly, the LDF was available to any person who owned an asset in Liechtenstein at the time that they registered to use the LDF.  For the purposes of disclosure, it was not relevant when the taxpayer acquired the asset in Liechtenstein provided he/she owned the asset on registering for the LDF.  The British Crown dependencies’ facilities covered Guernsey, Jersey and the Isle of Man.  They were available to anyone who owned an asset in the relevant territory at any time between April 1999 and 31 December 2013.

These disclosure opportunities are now closed.

Enter the WDF

The intention behind the WDF is very clearly set out in HMRC’s recent publication ‘Offshore Disclosure Facilities’ published on 25 August 2016.

‘There’s nothing wrong with having investments overseas as long as you declare all taxable income and gains on your UK tax return.

The government has started to toughen its approach in tackling those who don’t declare the correct amounts of tax due on their offshore income and assets. New international collaboration to share information and laws to tackle non-compliance has started. However, there is still a chance to bring all your tax affairs up to date if you have worldwide income that’s not been taxed before.’

The WDF will commence on 5 September 2016.  In line with the current stern approach to tax evasion, the WDF offers no special or beneficial terms.

The WDF will be available to anyone who is disclosing a UK tax liability that relates wholly or in part to an offshore issue. This includes:

  • Income arising from a source outside the UK;
  • Assets situated or held outside the UK;
  • Activities carried on wholly or mainly outside the UK;
  • Where the funds connected to unpaid tax are transferred outside the UK.

Anyone who wishes to disclose a UK tax liability that relates wholly or in part to an offshore issue is eligible to use the facility under the terms.

Requirement to Correct

The requirement to correct is set out in HMRC’s publication above.

‘HMRC has launched a consultation on the Requirement to Correct. This is a consultation on proposals to introduce new legislation requiring any person who has undeclared UK tax liabilities in respect of offshore interests to correct that situation by disclosing the relevant information to HMRC. This will be ahead of the widespread adoption of the Common Reporting Standard in 2018. HMRC are proposing that the disclosure would include the outstanding tax, interest and penalties due for offences committed on or before 5 April 2017. The disclosure can be made through the Worldwide Disclosure Facility (WDF) and via the new online Digital Disclosure Service, both of which go live on Monday 5 September 2016.’

Common Reporting Standard

HMRC will shortly start receiving the first batch of data under the Common Reporting Standard (CRS), which will provide HMRC with vast web of global data on UK taxpayers’ offshore assets. The message is clear: clients with offshore assets which have been deliberately withheld from the UK authorities have one final chance to disclose; those who are not aware of such non-compliance must get their offshore affairs properly reviewed by a professional now.’

HMRC give warning

Over 100 countries have committed to new international agreements that will let HMRC see more about overseas accounts held by you. If you have declared your taxable income and gains then you have nothing to worry about. But if you haven’t, and HMRC finds out you will face an investigation and will have to pay the undeclared tax, a penalty of up to double the tax you owe, and could even go to prison.

Financial institutions are already collecting information on your overseas accounts.

HMRC will get much more information about your:

overseas accounts

insurance products

other investments, including those held through overseas structures such as companies and trusts

The information includes details of either:

who’s holding the account or asset

who owns the entity holding the asset including their:

name

address

date of birth

the balance of the account

payments made into it

HMRC will use this information to go after those who’ve not paid their taxes, so go to them before they come to you.

Making the disclosure.

MRC expect the majority of cases meeting their obligation under the Requirement to Correct to be made via a disclosure, primarily through the Worldwide Disclosure Facility (WDF) and the new online Digital Disclosure Service (DDS) that went live on Monday 5 September 2016.  Once a disclosure is made, the taxpayer has 90 days to:

  • collate the information needed to complete the disclosure;
  • calculate the final liabilities including tax, duty, interest and penalties;
  • complete the disclosure, using the unique disclosure reference number provided when notifying.

Levy and Levy comment

Our comment today is very short.

Surely this will be the last disclosure opportunity that HMRC will offer the taxpayer?!  Watch this space.

 

Levy and Levy – the tax investigations and resolution specialists in London and Tunbridge Wells.