Civil Fraud Quarterly Round-Up: Q1 2021
The Worldwide Disclosure Facility (WDF) opened on 5 September 2016 and gives people a final chance to come forward and clear up their tax affairs before HMRC begin to receive information under the OECD’s Common Reporting Standard (CRS) in 2017. The receipt by HMRC of reported data under CRS is expected to result in a toughening of their stance on offshore non-compliance. HMRC’s guidance on the WDF date is summarised below.
Who can use the WDF?
The WDF will be available to anyone who wants to disclose a UK tax liability that relates wholly or partly to an offshore issue. An offshore issue includes unpaid or omitted tax relating to:
The person making a disclosure can make the disclosure about their own tax affairs, their company’s tax affairs, a limited liability partnership or on behalf of someone else (e.g. if you are a tax adviser or the executor of an estate).
Notifying HMRC of your intention to make a disclosure
In order to take advantage of the facility, you must first notify HMRC of your intention to make a disclosure using HMRC’s Digital Disclosure Service. You should do this as soon as you become aware that you owe tax on undeclared offshore income or gains. You will be required to provide your name, address, National Insurance number, Unique Tax Reference, date of birth and the details of any agent acting for you.
Disclosure to HMRC
Once you have notified HMRC, they will send you an acknowledgment and you will have 90 days from the date of this acknowledgement to make a full disclosure. As well as disclosing all previously undisclosed UK tax liabilities, you must calculate interest and penalties based on existing legislation.
HMRC can refuse your application to participate in the WDF if they suspect at any time that assets or funds included in your disclosure are wholly or partly made up of criminal property.
You must make full payment (unpaid tax, interest and penalties) in accordance with your disclosure on the same date that your disclosure is submitted. If you cannot pay what you owe immediately, you should contact HMRC before you submit your disclosure to agree paying arrangements.
Benefits of using the WDF
Provided that you comply fully with HMRC and your disclosure is correct, HMRC will not seek to impose a higher penalty (except in exceptional circumstances). HMRC may still impose a higher penalty if you are already under enquiry by HMRC, your disclosure is connected to a previous inaccurate disclosure or you do not follow existing legislation to calculate the penalties.
A toughening approach
The terms of the WDF are less favourable than previous disclosure facilities. Importantly, if you make a disclosure under the WDF you may still be liable to criminal prosecution. However, HMRC state that criminal investigation will be reserved for cases where they need to send a strong deterrent message or where the conduct involved is such that only a criminal sanction is appropriate.
After 30 September 2018, HMRC state that new sanctions will be introduced to reflect their increasingly hard-line approach to compliance. Given this, individuals with undeclared offshore income or gains should take advice now on making use of the WDF.
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