HMRC opens Worldwide Disclosure Facility

5 September 2016, HMRC launched the Worldwide Disclosure Facility (WDF), an online portal to enable taxpayers to correct past irregularities in their tax affairs by disclosing a UK tax liability that relates wholly or in part to an offshore issue.

The new facility follows closure of all other disclosure opportunities at the end of 2015, including the widely used Liechtenstein Disclosure Facility (LDF). The WDF is described as “the last chance” before tough new sanctions are applied, including higher penalties, ‘naming and shaming’ and a risk of criminal investigation.

The WDF offers no special terms, which represents a significant change of approach from previous HMRC offshore facilities, which offered beneficial terms to encourage taxpayers to make disclosure. Those using the WDF will pay the tax in full, with interest on top, with a minimum penalty of 30% of the tax due. This is higher than previous disclosure facilities such as the LDF, which offered a capped 10% and 20% penalty. Taxpayers could still face criminal prosecution. The quality of the information disclosed will be taken into consideration

However by 30 September 2018, HMRC will be receiving Common Reporting Standard (CRS) data from around 100 countries, which will allow them to identify and pursue those who have not come forward to regularise their affairs. It will also receive data from registers of beneficial ownership.

The WDF launch is timed to coincide with the recent announcement of proposed Requirement to Correct (RTC) legislation. Under the proposed legislation due to take effect from April 2017, those who do not put their offshore tax affairs in order by 30 September 2018 will be subject to significantly increased sanctions.

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. Under the simpler of HMRC’s proposed options, a standard penalty of 200% of the tax not corrected would apply. Taxpayers could also face a further penalty of up to 10% of the value of offshore assets, and “naming and shaming”, depending on the circumstances.

Jennie Granger, HMRC director general of enforcement and compliance, said: “We’ve closed old disclosure facilities, increased penalties, and ramped-up our powers to tackle evaders and those that help others evade. Alongside this, international cooperation through global tax transparency is making it easier for us to catch evaders, as we increasingly receive more information about financial assets which people had hoped would remain hidden. Our message couldn’t be clearer: there are no safe havens left for tax evaders and no-one should be in any doubt that the days of hiding money offshore with impunity are gone.”