A new online disclosure facility has launched this week, giving offshore tax evaders a final chance to settle outstanding tax on their wealth hidden offshore ahead of new data sharing arrangements and tougher penalties due to be introduced.
HMRC launched the Worldwide Disclosure Facility (WDF) on 5 September 2016, following the closure of offshore disclosure facilities such as the Liechtenstein Disclosure Facility at the end of last year.
According to HMRC’s figures, tackling tax evasion brought in £26.6bn by tackling tax evasion and avoidance in 2014-15. Since 2010, £2.5bn has been raised from moves to tackle offshore tax evasion.
HMRC announced at the time that one final disclosure facility would be launched to enable those with offshore irregularities to come clean to the taxman, but there has been little detail about how this will work until now.
This last chance to get your affairs in order comes before HMRC starts to receive an unprecedented amount of data to assist their crackdown on tax evasion. Over 100 countries have committed to new international agreements that will allow HMRC to access even more data about overseas accounts held by taxpayers.
The WDF is 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 wishing to disclose a UK tax liability in relation to the above is eligible to use the WDF You first need to notify HMRC that you will be making a disclosure. Once you have notified HMRC, you will have 90 days to:
- Collate the information needed to complete the disclosure,
- Calculate the final liabilities including tax, duty, interest and penalties, and
- Complete the disclosure, using the unique disclosure reference number provided when notifying.
The WDF offers no special settlement terms, unlike earlier schemes which offered reduced penalties. This means that those who come forward will pay the tax in full, with interest, and they could still face criminal prosecution.
There are a number of consultations running at the moment looking at the level of penalty/sanctions to be imposed on those who do not come forward during this disclosure opportunity, bearing in mind that this is the is the last of many facilities aimed specifically at offshore issues. One suggestion is that there will be a penalty of between 100% and 200% of the tax due if someone is discovered to have not used this disclosure opportunity when they should.
The WDF will run until September 2018. It is possible to make a disclosure under the WDF using the Digital Disclosure Service (DDS) launched in April this year. According to HMRC, one of the benefits of the DDS is that it removed the need for taxpayers to seek advice and help from accountants and professional advisors, as they can disclose by themselves.
However, we would strongly advise against disclosing by yourself if you are considering using the WDF. Professional support can make it much easier to collect the required information, ensure your calculations are correct and negotiate the best possible settlement terms within the required 90 day deadline.
If you are considering making a voluntary disclosure under the Worldwide Disclosure Facility, contact us and speak to our Tax Investigations Manager Anthony Middleton for your free, confidential consultation today.