Worldwide Disclosure Facility (WDF)

The Worldwide Disclosure Facility (WDF) allows those with undisclosed offshore money, gains, investments or assets to settle and regularise their tax affairs with HMRC but no longer offers favourable terms or lower penalties.

About the Worldwide Disclosure Facility (WDF)

The Worldwide Disclosure Facility (WDF) replaces previous disclosure schemes such as the Liechtenstein Disclosure Facility which closed at the end of 2015 and provided UK residents with undeclared tax liabilities a unique opportunity to settle and regularise their tax affairs with HMRC on favourable terms and immunity from prosecution.

The Worldwide Disclosure Facility (WDF), available from 5 September 2016, allows anyone wishing to disclose a UK tax liability relating wholly or partly 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

CONFIDENTIAL HELPLINE

IAN LEIGH

Senior Partner - Investigations & Disclosures

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

Manager - Investigations & Disclosures

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.

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 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.

WORLDWIDE DISCLOSURE FACILITY 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

Certificate of Tax Position — Letter from HMRC prompting UK residents with undisclosed offshore income or assets to disclose under the Worldwide Disclosure Facility.

INFORMATION SHARING

The launch of the WDF is linked to the implementation of the Common Reporting Standard (CRS), an international initiative where over 100 countries will exchange tax payer information on a multilateral basis.

The aim of the CRS is to crack down on the use of offshore jurisdictions to facilitate tax evasion. As a result of this, many UK residents with undisclosed offshore assets are being contacted by HMRC to disclosure under the Worldwide Disclosure Facility.

LETTER FROM HMRC?

Throughout 2020, HMRCissued ‘nudge letters’ to UK residents with potential tax liabilities on overseas income or gains.

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

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.

CONFIDENTIAL HELPLINE

IAN LEIGH

Tax Partner

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

DIANE HARPER

Tax Senior - Investigations & Disclosures

Diane has 38 years of experience in tax starting at HM Revenue & Customs, and has has significant experience dealing with HMRC disputes, investigations and disclosures.

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