If HMRC decides to carry out an investigation into a company’s tax returns, it is important...
More than a hundred countries around the world have made a commitment to exchange information with each other under the CRS (Common Reporting Standard) to increase tax transparency on an international scale.
HMRC’s offshore facilities were all closed at the end of December 2015. Until that time, incentives were given by HMRC to persuade individuals to voluntarily clear their tax matters. On 5th September 2016, the Worldwide Disclosure Facility (or WDF) was opened. New sanctions were introduced on 1st October 2018 under Requirement to Correct which reflected the tougher approach that HMRC would be taking.
Who Is Able To Use The WDF?
Anybody who wishes to disclose to HMRC a tax liability in the UK relating partly or wholly to offshore issues may use this facility. Offshore issues include omitted or unpaid tax that relates to:
- Income that arises from sources in territories outside the United Kingdom.
- Activities that carry on mainly or wholly in territories outside the United Kingdom.
- Assets that are held or situated in territories outside the United Kingdom.
- Funds connected with omitted or unpaid UK tax which has been transferred to or that is owned in territories outside the United Kingdom.
Should HMRC suspect or know that the funds or assets that are included within the disclosure are partly or entirely composed of criminal property, it can refuse the application. All disclosures that are made by a taxpayer who is currently being investigated, including all tax avoidance scheme arrangement disclosures, are referred to an investigating officer in order to determine whether they can be accepted.
Anyone who has previously settled after a disclosure or in-depth enquiry will have their new disclosure considered for additional investigation and, should it cover the same period, a higher penalty may be levied.
The customers outlined below are able to make a WDF disclosure:
- Individuals about their own or their company’s tax affairs.
- Tax advisers, personal representatives, or estate executors on behalf of somebody else.
How To Register For WDF
You can notify HMRC with the DDS (Digital Disclosure Service) The following information will be required to disclose and notify:
- Name
- Address
- NI number
- UTR
- Birth date
- Contact details, name, and reference, of any agent who is acting on your behalf
After notifying HMRC of an intention to disclosure under the WDF, you have a further 90 days during which to obtain the essential information to complete the disclosure, work out your final liabilities such as tax, interest, penalties, and duty, and complete the disclosure itself. All extra information to support the disclosure requested by HMRC must be provided in order to check the completeness and accuracy of the disclosure.
What Are The WDF’s Terms?
The WDF’s terms mean that you have to:
- Be eligible to use the scheme.
- Make a complete disclosure of every previously undisclosed United Kingdom tax liability.
- Work out penalties and interest based on existing legislation.
Should the disclosure be complete and correct and as long as you cooperate fully by providing any further requested information to check the disclosure, HMRC will not impose higher penalties, except in certain circumstances. No details of the disclosure will be published.
Should the disclosure be inaccurate or incomplete, or should you fail to send more information when requested, it is possible that HMRC will publish details of the disclosure, apply a greater penalty and even open a criminal or civil investigation.
Pre-Disclosure Agreements And Complex Issues
In cases where a disclosure is especially complex, it is possible to request a further 90 days after notification during which to complete the disclosure. This equates to a total of 180 days altogether. You must contact HRMC should you want to request additional time.
Liabilities That Are Not Included Within The Disclosure
Should you have to disclose any VAT liabilities you must tick the relevant box on the disclosure. If either yourself or your partner receive tax credits or have received them during any year included within the disclosure, the disclosure should still be made, but the relevant box must be ticked on the form. The details are then passed onto the appropriate department for consideration. Any changes required to your tax credits amount will be notified to you separately.
Some disclosures regarding Inheritance Tax may be for over 20 years. Any liability for over twenty years ago may not be disclosed with the DDS. In cases where there are liabilities dating back more than twenty years, the Offshore Disclosure Facility must be contacted.
The Offer Letter
One condition of utilising the WDF is that an offer is made for the entire amount of duties, taxes, penalties and interest owed. You will receive an HMRC acknowledgement within a 15 day timeframe of them receiving the completed disclosure and within a 90 day period of that acknowledgement, HMRC will aim to inform you about their intended action in the matter. In some cases, HMRC will request certain evidence in order to ensure the disclosure is complete and accurate. You must comply with these requests.
What Happens If HMRC Does Not Accept The Disclosure?
If HMRC is unable to accept the disclosure they may resume an existing enquiry or open a new one. Alternatively, they may contact you to request further explanations or information.
Making Payment
Once you have notified HMRC about your disclosure intention, you will receive a unique PRN and DRN. These must be used in all related correspondence in the future. You will also receive details telling you how you can pay. If you are unable to pay the amount you owe immediately, you will have to get in touch with the Offshore Disclosure Facility in order to agree to payment arrangements before you submit the disclosure. Full payment must be made on the day of submitting the disclosure.
Seeking Professional Advice
If you intend to make a disclosure under the WDF, it is crucial to take professional advice from a tax investigation specialist in order to ensure that you are taking the right course of action for you.
