On 5 September 2016 HM Revenue & Customs’ (HMRC) launched the latest Disclosure Facility called the Worldwide Disclosure Facility (WDF) following the closure of the Liechtenstein Disclosure Facility (LDF) and the Crown Dependency equivalents.
HMRC state the Worldwide Disclosure Facility (WDF) will be the last chance for UK taxpayers to come forward and regularise their tax affairs before HMRC commence using the data from the Crown Dependencies (of Jersey, Guernsey and the Isle of Man) and the British Overseas Territories (of Cayman, British Virgin Islands etc.) being provided to HM Revenue & Customs from 1 October 2016 under the Tax Information Exchange Agreements (TIEAs) and then from elsewhere in the world under the Common Reporting Standard (CRS).
HMRC have also announced that new sanctions under Requirement to Correct will then be introduced that reflect HMRC’s toughening approach once the WDF has closed.
The Pro’s and Con’s
The WDF pro’s include
- Streamlined process like the LDF
- Prompt registration and short disclosure period of 90 days
- Both UK and offshore matters can be addressed
- Tax avoidance schemes can be resolved as well as any matter involving tax evasion
- What comes after the WDF will be much less attractive
However, the WDF cons include:
- No guaranteed immunity from prosecution, unlike the LDF
- Full payment of outstanding taxes must be made within 90 days of registration
- Higher penalties for offshore disclosures
- HM Revenue & Customs can go back for up to 20 years (previously capped at 5 April 1999)
The WDF will be an option for some taxpayers but for others there may be alternative means of regularising their taxation affairs that are more appropriate, for example the Contractual Disclosure Facility (CDF).
HMRC is unclear regarding who may be excluded from participating in the WDF, however, based on previous disclosure facilities it would be reasonable to expect that anyone already subject to criminal proceedings or currently being investigated under Code of Practice 9 (CoP9)/CDF would be excluded from the WDF.
A current practical problem with the WDF is that agents are unable to access the Digital Disclosure Service (DDS) via the Government Gateway to submit disclosures on behalf of their clients. It is understood HMRC are working on a solution which is scheduled to be implemented by the end of September 2016.
In the meantime, a dedicated HMRC contact number is available.
The Automatic Exchange of Information
HMRC view the WDF as “the last chance saloon” for UK taxpayers to make a tax disclosure before the almost 100 countries who have signed up to the CRS commence sharing information automatically.
After the flow of information from both the Crown Dependencies and British Overseas Territories in October 2016, the information starts flowing in September 2017 from the “early adopters” and then increases in September 2018 with all the remaining CRS participators; it is therefore only a matter of time before HMRC receives a wealth of details to reconcile with a taxpayers filed tax position.
How quickly HMRC will use the information is not known, however, the odds of a more favourable favourable outcome get longer once the information is in HMRC’s hands.
If you wish to discuss this or any other matter with a member of the team, please contact us.