Out-Law / Your Daily Need-To-Know

HMRC publishes new tax disclosure guidance as final reporting facility opens

06 Sep 2016, 10:06 am

UK taxpayers who have not yet reported any tax irregularities arising from offshore income and gains have been given a final opportunity to voluntarily disclose these issues to HM Revenue and Customs (HMRC).

The Worldwide Disclosure Facility (WDF) does not offer any special terms, as was the case with HMRC's previous disclosure facilities. It will, however, allow those with outstanding tax to pay to put their affairs in order before tougher penalties come into force in 2018.

Those that use the new disclosure facility will have to pay the outstanding tax, plus interest charged daily from the original due date until the date that the tax is actually paid. They may also have to pay a penalty calculated as a percentage of any additional amount due; charged at a level based on "why you didn't tell HMRC about your tax liability, or why you sent in a return containing inaccuracies", according to new guidance published by the tax authority.

As the disclosure facility relies on self-reporting, HMRC may also charge higher penalties or pursue criminal charges should the taxpayer make an "incorrect or incomplete" disclosure, according to the guidance.

Taxpayers will be expected to pay the tax that they owe in full at the point of disclosure, according to the guidance. Those who cannot afford to pay the full amount must contact HMRC before completing the documentation.

The WDF will run until 30 September 2018; before the new automatic exchange of information agreements come into full effect the following month. The government is currently consulting on new legal sanctions for "failing to correct", which would apply to those who have not put their tax affairs in order by this date and which could include minimum penalties of 100% of the unpaid tax.

'Offshore issues' to which the WDF applies include unpaid or omitted tax relating to income arising from an offshore source, assets held outside the UK and activities carried out "wholly or mainly" in another territory, according to the guidance. The facility also covers transfers of funds connected to unpaid or omitted UK tax to another territory.

Disclosure facilities will not be available to taxpayers against whom HMRC has already opened an enquiry or compliance check, according to the guidance. They are also unavailable where HMRC believes that the money subject to the disclosure is the proceeds of "serious organised crime" including VAT fraud, organised tax credit fraud or "wider criminality".