TT272: Worldwide Disclosure Facility
A last opportunity to correct offshore errors in respect of taxation before the new failure to correct offence and related punitive penalties come into effect on 1 October 2018
Urgent action is required by all taxpayers that might be impacted
There is nothing unlawful in UK tax residents having bank accounts or assets outside of the United Kingdom but unless you are a non-UK domiciled individual completing your tax returns explicitly on the remittance basis all UK residents are required to declare and pay tax on their worldwide income and capital gains whether or not they are brought back into the United Kingdom.
HMRC has over the past few years developed an extensive series of international agreements and they are now collecting from more than 100 jurisdictions worldwide information about individual’s overseas bank accounts, structures, trusts and investments. This gives HMRC unprecedented levels of information with which to check that individuals have paid the correct tax on all their income and gains.
As a result of the data they hold HMRC have already written to a number of clients who have received letters advising them that they hold information about overseas accounts or assets. The letters ask the individual to check that they have paid the correct amount of tax on their worldwide income and if they have not inviting them to make a disclosure under the Worldwide Disclosure Facility (WDF). If tax is due and no disclosure is made HMRC will open an enquiry into the taxpayer’s affairs. HMRC has in many cases the ability to assess unpaid tax due over a 20 year period.
We recommend that all clients that have any overseas income or gains review their affairs to ensure that proper disclosure of all income and gains have been made. For example, check that bank accounts held overseas are fully reported. It may be that you own an overseas property that you pay the bills through a local bank account that pays a small amount of interest. You may not be aware of interest arising, but the chances are that HMRC have a report of the income and at some point, will raise an enquiry based on it.
If you hold investments overseas undeclared income and gains may be considerable and urgent action is required.
The WDF provides favourable terms for taxpayers to regularise their tax affairs relating to overseas matters because the penalties chargeable are based on penalty levels that are lower than that available outside the WDF. Penalties in some instances are double on the same facts outside the WDF. There is accordingly a powerful incentive for taxpayers to settle their affairs using the WDF.
To pile the pressure on taxpayers to regularise their past tax failings in respect of overseas matters a new Failure to Correct (“FTC”) regime will come into effect on 1 October 2018.
Penalties under FTC start at 200% of the unpaid tax and although they can be mitigated cannot be reduced below 100%. Where assets are moved to try and avoid the penalty even higher levels of penalties are chargeable. HMRC has also extended their enquiry windows by four years for tax on overseas income and gains arising in the years to 5th April 2017 to give them more time to investigate the information they are collecting from around the world.
The opportunity to use the WDF closes on 30 September 2018 and to benefit from the beneficial settlement terms you have to register by the closing date. Once registered under the WDF a taxpayer has 90 days to make a full disclosure of under-declared tax liabilities.
We have extensive experience in all HMRC enquiries including using the WDF. If you consider that you may benefit from the WDF please get in touch with us to discuss your case and put your mind at rest. Tax enquiries can be incredibly stressful. We will guide and advise you through the entire process.
Talk to Barnes Roffe today