Managing an offshore disclosure - what to do next?

04 April 2016

Mike Down

The revelations emerging from the 'Panama Papers' and the threat of further leaks to come may result in some sleepless nights for those who are worried about being caught out. But what can you do if you are?

The statement issued by HMRC makes it clear that the taxman already has a great deal of information on offshore companies, including in Panama. It has requested the leaked data from the International Consortium of Investigative Journalists with a promise of swift and appropriate action to come.

As ever, the best advice is to come forward voluntarily to HMRC, and be as open and transparent as you can be about your tax affairs. In the event that the taxman comes knocking, the repercussions can be far more severe so taking specialist advice is an absolute necessity.

Those who wish to regularise their tax affairs might wish to consider their options under the Contractual Disclosure Facility (CDF).

HMRC carries out investigations where they suspect tax fraud under Code of Practice 9 (COP9). Under this code, HMRC offers the taxpayer the opportunity to make a full disclosure under a contractual arrangement called the CDF. The investigation should embrace all aspects of a person’s tax affairs. The CDF provides the opportunity to disclose all irregularities along with the reasons they arose, which can help to reduce any civil financial penalties that may become due. Furthermore, once CDF inclusion is secured, taxpayers making a full disclosure and settling all liabilities due will benefit from immunity from criminal investigation and potential prosecution.

Previously, those with offshore tax irregularities could have taken advantage of the Liechtenstein Disclosure Facility (LDF), but this closed at the end of 2015. HMRC will shortly be providing details of a new ‘tougher’ offshore disclosure facility under which those who have yet to come forward will be encouraged to do so and settle whatever tax is due. Unlike the LDF, this new facility will not offer criminal immunity and is likely to involve a minimum penalty of 30 per cent of the tax underpaid.

If you would like any more information on this issue please get in touch with Mike Down, or your usual RSM contact.