Background to the facility
On 5 September 2016 HMRC launched the new Worldwide Disclosure Facility (WDF) relating to non-compliance by taxpayers in respect of their offshore interests.
The launch of the WDF is linked to the implementation of the Common Reporting Standard (CRS) from 2017, under which HMRC will receive taxpayer information from over 100 countries. In addition to CRS, HMRC will also receive data from registers of beneficial ownership.
The WDF offers no special terms, representing a change of approach from previous HMRC offshore facilities (for example, the Liechtenstein Disclosure Facility (LDF)), which offered beneficial terms to encourage people to come forward and clean up their tax affairs. HMRC has adopted this approach because it believes that, with the implementation of CRS, it now has the means to identify and investigate those who do not come forward.
The WDF launch is also timed to coincide with the recent announcement of proposed Requirement to Correct (RTC) legislation. Under the legislation due to be introduced in April 2017, those who do not put their offshore tax affairs in order by 30 September 2018 will be subject to significantly increased sanctions.
Implications of uncorrected errors relating to offshore interests
A failure to correct will create a situation where the taxpayer has committed an additional offence on top of their original non-compliance by not correcting within the window. Whilst the precise details are still subject to consultation, HMRC’s intention is that those who do not act will face much harsher penalties than those who did. In addition to higher tax geared penalties, taxpayers who fail to correct their affairs could face a further penalty of up to 10 per cent of the value of offshore assets, naming and shaming in the press and possible criminal prosecution.
HMRC have made it clear that RTC is not just aimed at those who deliberately evade tax, but any taxpayers whose offshore tax affairs are not compliant with current UK legislation.
Taxpayers with offshore interests are often those with the most complex tax affairs. HMRC is urging these taxpayers to seek professional advice and review their tax position, as this represents a final opportunity for them to ensure everything is in order; or to put right anything that may be amiss before HMRC toughen their approach.
Should a disclosure under WDF be required, then HMRC require a notification to be made online and the taxpayer will then have only 90 days to provide a detailed assessment and disclosure of all previously undisclosed tax liabilities and a calculation of interest and penalties. With such a tight timescale and complex legislation, professional advice is essential in order to make the full and accurate disclosure that HMRC require.
How we can help
RSM has significant experience in both offshore tax matters and HMRC disclosures. We can assist with an initial review of your tax affairs and, if required, guide you through the WDF process, liaising with HMRC on your behalf to achieve the best possible outcome.