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

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

UK India Worldwide Disclosure Facility (WDF) HMRC Letter

HMRC prompts UK residents with undisclosed assets and income in India to disclose under the Worldwide Disclosure Facility (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.

UK India Worldwide Disclosure Facility (WDF) HMRC Letter
HMRC prompts UK residents with undisclosed assets and income in India to disclose under the Worldwide Disclosure Facility (WDF)

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 in India. This is generally reported through an annual self-assessment. Those that have failed to 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 a taxpayer has submitted inaccurate tax returns, the time period can be capped at 4 years for innocent errors, 6 years for careless errors and 20 years for deliberate errors. If the taxpayer failed to notify chargeability i.e. failed to register for self-assessment, the default position is 20 years, unless the taxpayer has a reasonable excuse for the failure.

It is a misconception that you can avoid filing a disclosure under the WDF by simply amending or filing historic tax returns.

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.

Mitigate penalties with a reasonable excuse?

WDF disclosure after 1 October 2018 are subject to the Requirement to Correct (RTC) legislation which sets out minimum penalties, unless you can demonstrate a reasonable excuse as per FA (No. 2) 2017, Schedule 18, paragraph 1. The RTC legislation specifically states circumstances that cannot be taken to be a reasonable excuse:

  • an insufficiency of funds is not a reasonable excuse,
  • where you relied on any other person to do anything, that cannot be a reasonable excuse unless you took reasonable care to avoid the failure
  • where you had a reasonable excuse but the excuse has ceased, you are only to be treated as continuing to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased
  • relied on advice, for example, relied on a tax adviser who did not have appropriate expertise for giving the advice

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).

  • Over 100 years of combined experience dealing with Inland Revenue/HMRC tax investigations
  • Manage the full process on your behalf or advise you on the best strategy to approach
  • Minimise potential penalties and interest
  • Negotiate affordable repayment terms
  • Cost effective, fixed and capped fee arrangements
  • A Top 60 UK accountancy firm (ranked by UK fee income)
  • ICAEW regulated firm of Chartered Accountants
  • Hindi, Punjabi and Gujarati speaking tax advisers

INTRODUCTORY MEETING

CONTACT US TO ARRANGE AN INTRODUCTORY MEETING, OR FOR A QUOTE.

Worldwide Disclosure Facility - Andrew Lewis

ANDREW LEWIS

Tax Manager


Andrew manages the firms personal tax department, including a portfolio of personal tax clients such as High Net Worth Individuals, Self Employed, Directors, Landlords, Non-Residents and Partnerships. Andrew also 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.
Diane Harper - Tax Investigations & Disputes

DIANE HARPER

Senior Tax Manager (ex-HMRC)


Diane has 38 years of experience in tax starting with 6 years at H M Revenue & Customs. She now manages a portfolio of 350 personal tax clients including high net worth individuals, Barristers, Self Employed, Directors, Non-Residents and Partnerships.

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