The most innovative offshore disclosure facility, the Liechtenstein Disclosure Facility (LDF), ended on 31 December 2015. After a false start in April 2016, HMRC has now launched the next disclosure facility, on 5 September 2016.
Very few details about the facility have been announced. All we know now is that it will be called the WDF, short for Worldwide Disclosure Facility, and that the terms for settlement will be less favourable than the LDF. For instance, there will be no guaranteed immunity from a criminal investigation, nor will there be reduced levels of penalties or a reduced period for the disclosure.
The launching of a further “final” disclosure facility may still leave the cynical asking, “If I don’t disclose, what are HMRC going to do about it?” A very good question and one HMRC has been pondering on for some time now.
The early adopters of the Common Reporting Standards (CRS) will be exchanging bank account information with HMRC for the year 2016 next year. Therefore, if you have any unpaid taxes connected with an overseas asset then it is advisable to consider making a disclosure utilising the WDF or if the matter warrants it, making a disclosure via Code of Practice 9.
To ensure individuals take advantage of regularising their tax affairs, HMRC issued a consultation document on 24 August 2016 called “Tackling offshore tax evasion: a requirement to correct”. Essentially this document talks about introducing new legislation that will require individuals with outstanding tax liabilities relating to offshore interests, where they have yet to put their UK tax affairs in order, to come forward and correct those liabilities by September 2018.
The consequence of not meeting the requirement and carrying out the necessary correction within the defined window would see the taxpayer subjected to a new set of legal sanctions for ‘‘failing to correct’’. Currently the consultation document is proposing maximum penalties of up to 200% for “failing to correct”.
This document is calling for comments by 19 October 2016. Notwithstanding significant adverse comments – and it is difficult to see what could throw this out completely – it is clear that HMRC still view the area of holding offshore assets as a significant risk of not having paid the correct amount of tax.
If individuals wish to discuss matters surrounding their offshore assets and whether a disclosure should be made under the WDF or Code of Practice 9, then please get in touch with your usual contact partner or use our enquiry form.