HMRC prompts UK residents with a financial connection to India to disclose under the WDF

Between August 2020 and December 2020, HMRC issued “nudge letters” to UK residents with potential tax liabilities on overseas income or gains, prompting them to make a disclosure under the Worldwide Disclosure Facility (WDF).

This latest batch of letters specifically targets UK residents with a financial connection to India, such as those that hold a high-yield rupee fixed deposit account or a NRI/NRO/NRE accounts. In most cases, UK residents are subject to UK taxation on their worldwide assets, including overseas bank interest.

Some also targeting those that own rental property in India, where the tax position is more complex.

Common Reporting Standard (CRS)

It is understood this latest wave of letters follow the receipt of financial information under the Common Reporting Standard (CRS) from the Income Tax Department of India. The CRS is an international agreement involving the UK and over 100 countries including India. It allows for the exchange of information between jurisdictions about financial accounts and investments to help stop tax evasion.

Certificate of Tax Position

Attached to the letters is a ‘Certificate of Tax Position’. This instructs individuals to sign a statement stating that either their tax affairs need to be brought up to date through the Worldwide Disclosure Facility (WDF), or they have correctly declared all their worldwide income and gains. the consequence of making an incorrect Certificate of Tax Position declaration could be severe.

ABOUT THE WORLDWIDE DISCLOSURE FACILITY (WDF)

UK residents are subject to UK tax on worldwide income and gains, including India. This is generally reported through an annual self assessment. Those that have failed declare may now need to do so under HMRC’s Worldwide Disclosure Facility (WDF).

The WDF, launched in 2016, allows those with undisclosed offshore money, gains, investments or assets to settle and regularise their tax affairs with HMRC, but unlike previous disclosure arrangements, no longer offers any favourable terms or lower penalties.

HOW FAR BACK

There are complex rules that determine the time period that needs to be disclosed under the WDF. Generally speaking, if you did not register for a Self Assessment you may have to disclose, for the full period you held the account, up to a maximum of 20 years. If you registered for a Self Assessment and HMRC accept that the omission was careless, you may limit the disclose to 6 years.

WDF PENALTIES

WDF disclosure after 1 October 2018 are subject to the Requirement to Correct (RTC) sanctions which sets out minimum penalties to reflect HMRC’s toughening approach.

FTC penalties for a “prompted” disclosure is generally 200% of the unpaid tax, but can be negotiated down to 150% depending on the quality and accuracy of the disclosure. “Unprompted” disclosures can be reduced down to 100%, again depending on the quality and accuracy of the disclosure.

FTC will not necessarily apply to all years and there are complex rules for determining how many years may be assessed and the rates of penalty chargeable.

Moreover, HMRC have confirmed an inaccurate or incorrect disclosure may lead to a civil intervention or criminal prosecution. It is therefore important to appoint a qualified professional with the relevant experience in dealing with such cases. Jeffreys Henry LLP has significant experience in dealing with HMRC investigations and disclosures, including the current WDF (opened on 5 September 2016) and previous the Liechtenstein Disclosure Facility (closed in 31 December 2015).

The WDF will not be appropriate in every case and in more serious cases an alternative approach may need to be adopted.

Regardless of whether a disclosure is required or not, the consequence of making an incorrect Certificate of Tax Position declaration could be severe.

CONFIDENTIAL ADVICE

For further information, please Email Us

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IAN LEIGH

Senior Tax Partner

Ian has significant experience in dealing with HMRC tax investigations and disputes including Section 9A enquires, the Worldwide Disclosure Facility (WDF), Code of Practice 9 and the Contractual Disclosure Facility

ANDREW LEWIS

Personal Tax Manager

Andrew has significant experience in dealing with HMRC tax investigations and disputes including Section 9A enquires, the Worldwide Disclosure Facility (WDF), Code of Practice 9 and the Contractual Disclosure Facility such as EBT arrangements.

PAUL WILLIAMS (ex-HMRC)

Tax Associate

Paul has 35 years of experience in tax starting with 6 years at HMRC. Paul provides specialist advice to private individuals under a HMRC tax investigation or those wishing to make a voluntary disclosure, particularly the WDF or Let Property Campaign.

OUR EXPERIENCE

Jeffreys Henry LLP has significant experience in dealing with HMRC investigations and disclosures, including the current WDF (opened on 5 September 2016) and previous the Liechtenstein Disclosure Facility (closed in 31 December 2015).

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