Having prematurely closed all its pre-existing facilities to disclose tax irregularities on 31 December 2015, we have been waiting for news of the facility to replace them that was first announced by the then Chancellor last year. Finally, we have news to report.
We have been a supporter of previous HMRC disclosure facilities as they offered individuals and businesses with tax irregularities a chance to make their peace with HMRC, in return for certainty and a “softer landing” than could otherwise be expected. The lack of a facility has been bad news for both HMRC and individuals and businesses.
HMRC have now announced (with little notice) a new disclosure facility tied in with the introduction of worldwide reporting of assets and investments by financial institutions under the newly implemented Common Reporting Standard (“CRS”) as well as a proposed new set of rules 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 CRS 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.
Under the terms of the CRS (and other financial exchange of information agreements in place) HMRC is collating information about overseas accounts, insurance products and other investments, including those held through overseas structures such as companies and trusts. This will include details of who the beneficial owner of such assets and investments is. HMRC will be matching this information with what has been declared, and will be acting to investigate cases of under-declaration, both using civil means, and criminal investigatory means where it feels this is appropriate.
So how will the Worldwide Disclosure Facility (“WDF”) work?
The WDF will launch on 5 September 2016 and 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.
The individual or business concerned will be able to make a disclosure from 5 September 2016 via the online Digital Disclosure Service and will first need to notify its intention to disclose.
From 5 September, the individual or business only needs to tell HMRC that you will be making a disclosure. Once an intention to make a disclosure has been made, there is a 90-day period 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.
We would advocate seeking suitably qualified professional advice before making any disclosure, and at Outhwaite Associates we have a wealth of experience in managing disclosures to HMRC and securing excellent results for clients. We also support advisers acting for clients who may not have experience of managing disclosures to HMRC.
What if I have Tax Irregularities to Disclose, but they do not Relate to Offshore Issues?
We can still help you make a proactive disclosure to HMRC, resulting in the best possible outcome for you. Please contact us if you have any concerns.