HMRC Worldwide Disclosure Facility (WDF) Specialists

The Worldwide Disclosure Facility (WDF) allows individuals, companies, trustees and personal representatives to disclose previously undeclared UK tax liabilities relating wholly or partly to offshore matters to HM Revenue & Customs (HMRC).

Offshore disclosures can be complex. Different assessment time limits and penalty provisions can apply and historic Failure to Correct (FTC) penalties can potentially be substantial.

GSC Tax Consultancy provides specialist assistance with disclosures involving overseas income, property, investments, bank accounts, gains and other offshore assets.

Our team includes former senior HMRC tax investigation specialists with extensive experience of complex tax enquiries, disclosures and penalties.

HMRC guidance: Make a disclosure using the Worldwide Disclosure Facility

What GSC Tax Consultancy Can Do for You

A Worldwide Disclosure Facility disclosure involves considerably more than simply telling HMRC about previously undeclared overseas income.

The correct tax years must be identified, historic liabilities calculated and the appropriate penalty legislation considered. The taxpayer must also assess the behaviour that resulted in the non-compliance, which can affect both how far HMRC can look back and the penalties payable.

GSC Tax Consultancy can:

• review your UK and overseas tax position before HMRC is notified;
• establish whether the WDF is the appropriate disclosure route;
• identify offshore income, gains and assets requiring disclosure;
• review your UK residence position for the relevant years;
• consider Double Taxation Agreements and foreign tax credits;
• reconstruct historic income and gains where records are incomplete;
• establish the correct statutory assessment periods;
• analyse whether the behaviour was non-careless, careless or deliberate;
• consider whether Requirement to Correct and Failure to Correct provisions apply;
• review whether there is a reasonable excuse;
• calculate tax, interest and the appropriate penalty;
• notify HMRC through the Digital Disclosure Service;
• prepare and submit the complete WDF disclosure;
• prepare representations supporting the appropriate penalty position;
• deal directly with HMRC following submission; and
• negotiate with HMRC where it challenges the disclosure.

Our objective is to prepare a disclosure that is complete and technically correct while ensuring that you do not unnecessarily concede additional tax years, liabilities or penalties that are not properly due.

What Is the Worldwide Disclosure Facility?

HMRC introduced the Worldwide Disclosure Facility in 2016 for taxpayers who need to disclose a UK tax liability relating wholly or partly to an offshore issue.

This can potentially include:

• interest from overseas bank accounts;
• foreign dividends and investments;
• overseas rental income;
• gains from foreign property or investments;
• foreign pensions;
• overseas business income;
• offshore companies and trusts; and
• UK income or gains where the proceeds were subsequently transferred offshore.

Importantly, simply having an overseas bank account, property or investment does not automatically mean UK tax has been underpaid.

The first step should therefore be establishing whether there is actually a UK tax liability.

HMRC guidance: Worldwide Disclosure Facility

How Does the WDF Process Work?

The process normally begins by notifying HMRC through its Digital Disclosure Service (DDS).

HMRC then provides a Disclosure Reference Number (DRN) and payment reference.

Once HMRC acknowledges the notification, the taxpayer generally has 90 days to prepare and submit the completed disclosure.

The disclosure needs to calculate the relevant tax, interest and penalties and explain the circumstances surrounding the historic non-compliance.

For complex cases, it can therefore be sensible to undertake significant preparatory work before formally notifying HMRC and starting the 90-day period.

How Far Back Can HMRC Go?

There is no single period that applies to every offshore disclosure.

The relevant period can depend upon:

• the type of tax involved;
• whether tax returns were submitted;
• whether HMRC was notified of the liability;
• whether reasonable care was taken;
• whether the behaviour was careless or deliberate;
• offshore assessment provisions; and
• whether the Failure to Correct regime applies.

HMRC requires taxpayers using the WDF to self-assess their behaviour.

This is an important part of the disclosure because the behaviour adopted can affect both the years included and the penalty calculation.

We therefore establish the correct statutory time limits before deciding which years should be included.

Requirement to Correct and Failure to Correct

The Requirement to Correct (RTC) required taxpayers with certain historic offshore tax non-compliance to correct their position by 30 September 2018.

Although that deadline has passed, the rules remain important because a historic failure to correct can potentially bring the Failure to Correct penalty regime into consideration.

Failure to Correct penalties can be considerably higher than ordinary tax penalties.

HMRC's guidance states that the standard FTC penalty is 200% of the relevant tax liability, although reductions can apply depending upon the circumstances and quality of the disclosure.

It is therefore important to establish whether the FTC provisions actually apply before calculating the penalty.

HMRC guidance: Requirement to Correct

HMRC guidance: Failure to Correct penalties

Voluntary Disclosure and Penalties

The timing of the disclosure can have a significant impact on the penalty position.

For Failure to Correct purposes, HMRC distinguishes between voluntary and non-voluntary disclosures.

Broadly, a disclosure is voluntary where, at the time it is made, the taxpayer has no reason to believe that HMRC has discovered or is about to discover the offshore non-compliance.

HMRC also considers the quality of the disclosure, including the extent to which the taxpayer tells HMRC what happened, helps quantify the liability and provides access to relevant records.

Making a properly prepared disclosure before HMRC identifies the issue can therefore be important.

HMRC guidance: Voluntary and non-voluntary disclosures

Overseas Property, Investments and Bank Accounts

Overseas property and investments are common sources of WDF disclosures.

Issues can include undeclared:

• foreign rental income;
• overseas bank interest;
• foreign dividends;
• investment gains;
• property disposals; and
• foreign pensions.

Foreign tax having already been paid does not necessarily mean that there is no UK liability.

However, Double Taxation Relief may potentially reduce the UK tax payable.

Historic cases can also require detailed consideration of the taxpayer's UK residence position for each relevant tax year.

HMRC's Access to Offshore Information

International tax transparency has changed significantly.

HMRC receives financial account information from overseas jurisdictions through arrangements including the Common Reporting Standard (CRS).

Taxpayers should therefore not assume that an overseas bank account or investment will remain unknown to HMRC simply because it is situated outside the UK.

Where an historic offshore issue has been identified, delaying a disclosure can potentially affect the penalty position.

What If HMRC Has Already Contacted Me?

If HMRC has already written to you about overseas income or assets, the correspondence should be reviewed before making a WDF notification.

HMRC's contact can affect both the appropriate disclosure route and whether the disclosure is considered voluntary for penalty purposes.

Where an HMRC enquiry is already open, the position may need to be dealt with through the investigating officer rather than simply making a standalone disclosure.

What Happens After the Disclosure?

HMRC reviews the completed disclosure and may request further information or supporting evidence.

HMRC states that it expects the majority of complete WDF disclosures to be accepted without an in-depth enquiry, but it can investigate further where it considers the disclosure incomplete or incorrect.

The tax calculations, behaviour analysis and penalty position should therefore be prepared on the basis that they may need to be explained and supported.

Speak to a Worldwide Disclosure Facility Specialist

If you have overseas income, investments, property, bank accounts, trusts or other assets that may not have been correctly declared to HMRC, obtaining specialist advice before making a disclosure can be important.

GSC Tax Consultancy can review your circumstances confidentially, establish whether there is a UK tax liability and manage the WDF process with HMRC on your behalf.

Contact GSC Tax Consultancy for a confidential initial discussion about your Worldwide Disclosure Facility disclosure.