On 5 September 2016 HM Revenue & Customs’ (HMRC) launched their latest Disclosure Facility called the Worldwide Disclosure Facility (WDF) following the closure of the Liechtenstein Disclosure Facility (LDF) and the Crown Dependency equivalents. The WDF will close on 30 September 2018.
HMRC have stated that the WDF will be the last chance for UK taxpayers to come forward and regularise their tax affairs before they 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.). This data has been provided to HMRC since 1 October 2016 under the Tax Information Exchange Agreements (TIEAs) and from other countries under the Common Reporting Standard (CRS).
HMRC has also announced new sanctions under the Requirement to Correct and the Requirement to Notify that will take effect from September 2018 (when the WDF closes). Time is therefore running out for those taxpayers needing to correct any past. irregularities before they are found out.
The Pro’s and Con’s
The WDF pro’s include:
- A streamlined registration process (like the LDF)
- A short disclosure period of 90 days (which can be extended to 180 days in complex cases)
- 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
The WDF will be an option for some taxpayers. For others there may be alternative means of regularising their taxation affairs that are more appropriate, for example the Contractual Disclosure Facility (CDF).
HMRC has said that it will refer all disclosures made by taxpayers currently under enquiry, including all disclosure of tax avoidance schemes arrangements to the investigating officer to decide whether HMRC can accept them.
Anyone who has already made a settlement following an in-depth enquiry or has made a disclosure previously can still make a new disclosure. However, if the disclosure covers the same period, there may be higher penalties.
One of the practical problems with the WDF is that registration is accessed through the Digital Disclosure Service (DDS).
The Automatic Exchange of Information (AEOI)
AEOI began in October 2016 from the Crown Dependencies and British Overseas Territories and in September 2017 from the “early adopters” . In September 2018 the remaining CRS countries also begin exchanging information. Over 100 countries have signed up to the CRS. HMRC will utilise their CONNECT software to compare this information to that already held on any taxpayer’s file.
Therefore taxpayers may wish to correct any historical UK tax position sooner rather than later by making a Disclosure. In doing so a taxpayer can avoid avoiding a challenge by HMRC and minimise penalties.
If you wish to discuss this or any other matter with a member of the team, please contact us.