Complete Guide to Worldwide Disclosure Facility (WDF) & Settling with HMRC

Over 100 countries have come together and committed to exchange information on a multilateral basis under the Organisation for Economic Co-operation and Development’s Common Reporting Standard (CRS). The aim of the CRS is to crack down on the use of offshore jurisdictions to facilitate tax evasion.

The WDF became available from 5 September 2016. At that point, the Worldwide Disclosure Facility (WDF) replaced all the previous disclosure schemes such as the Liechtenstein Disclosure Facility and the Crown Dependencies Disclosure Facilities.

The Liechtenstein Disclosure Facility (LDF) became obsolete at the end of 2015. Prior to 2016, The Liechtenstein Disclosure Facility provided, UK residents who had undeclared tax liabilities, an opportunity to settle and regularise their tax affairs with HMRC while offering favourable terms and immunity from prosecution.

Please note that the WDF does not offer such favourable terms but it is still in your benefit to disclose as soon as possible to avoid hefty penalties.

Under the Common Reporting Standard (CRS), HMRC will start receiving details of taxpayers with offshore income or gains held in over 100 jurisdictions. It is more beneficial to disclose any offshore tax issues prior to HMRC starting an enquiry or investigation.

The Worldwide Disclosure Facility (WDF) came into practice from 5 September 2016. And it can be used by any person who needs to disclose a UK tax liability in relation to an offshore income or gain.

An offshore issue includes unpaid or omitted tax relating to: :
-- income arising from a source outside the UK
-- assets situated or held outside the UK
-- activities carried on wholly or mainly outside the UK
-- where the funds connected to unpaid UK tax that were transferred or owned outside the UK
-- anything having effect as if it were income, assets or activities of a kind described above

If at any time HMRC knows or suspects that assets or funds included in your disclosure are wholly or partly made up of criminal property, they have discretion to refuse your application to take part.

If you’re unsure if you meet the eligibility criteria for the facility, you must seek professional advice.

If you’re not resident in the UK, you can still make a disclosure if you meet the eligibility criteria above. .

-- WDF applies for all tax years up to and including 2019/20.
‍
-- If HMRC has sent you a tax return for that year or any tax year from 2016/17 onwards which is still outstanding, you must complete the return and you must not include these tax years on this disclosure form.

We will need to self-assess your behaviour which will indicate the number of years you need to disclose. i.e. 4, 6 or up to 20.

HMRC have sent a ‘nudge’ letter to thousands of individuals in its ‘at-risk’ population – and more such letters are expected during the course of 2020 and in near future.

The purpose of the letter is to:
-- explain that HMRC has information on an offshore asset held by the recipients
-- request confirmation that their tax affairs are up to date
-- ask for a signed declaration that they know of no inaccuracies in their returns or
-- request confirmation that a tax disclosure will now be made

Firstly, take it seriously. HMRC has found a potential issue in your offshore tax affairs – going back up to 20 years. The anomaly may be easily explained; but HMRC is likely to escalate its enquiries if you don’t reply.

Secondly, where possible, contact HMRC. They may give you more information about the asset in question, which will help focus your review of your tax affairs. However, there’s no guarantee they’ll share anything with you.

And thirdly, take the opportunity to step back. Work with a tax expert to review your offshore assets and ownership structures, ensure that they’re operating effectively, and check that there are no issues that you need to disclose.

Remember: a false declaration could be a criminal offence. Careful consideration and professional advice are essential before responding to a nudge letter, or making a disclosure.

The 1to1 Accountants team has extensive experience of advising on offshore tax, RTC compliance and disclosures to HMRC including the WDF (the Worldwide Disclosure Facility) which is a HMRC process enabling taxpayers to correct past irregularities in connection with offshore matters.

HMRC has issued (and is continuing to issue) other letters to:
-- tenants and landlords regarding UK properties owned overseas, asking for information to be provided.
-- those suspected of having offshore investment funds, asking people to check Excess Reporting Income and Offshore Income gains have been declared correctly.

We can help you, if you have received this letter and need help in this regard. Feel free to contact us.

No you should disclose as soon as possible. If you act voluntarily then its possible you can get away with lower penalties.

Your future affairs will be streamlined and you will stop accumulating future penalties and interest.

Summary of the WDF Process:
‍
-- Notify HMRC of the intention to disclose via the Digital Disclosure Service (DDS).
‍
-- A disclosure will then have to be prepared within the next 90 days with calculations of the additional tax due. This will be submitted through the DDS.
‍
-- At the time of the disclosure, the taxpayer will be asked to self-assess their behaviour. This is a technical issue which will impact on the penalties and will determine the number of years that disclosure will cover (four, six or 20 years).
‍
-- Any technical matters impacting the disclosure (such as residence or domicile status) must be disclosed.
‍
-- In exceptional circumstances, advance clarification may be sought in respect of complex or contentious issues.
‍
-- As part of the disclosure, the taxpayer will need to enter the maximum value of assets held outside the UK over the last five years including cash, investments and personal goods such as jewellery.
‍
-- Payment must be made at the time of submission. However a ‘Time to Pay’ may be agreed where appropriate.

For more information on the Worldwide Disclosure Facility, please call us on 03336667121 or schedule a no-obligation online call.

-- HMRC Worldwide Disclosure Opportunity
-- HMRC Offshore disclosure facilities