Worldwide Disclosure Facility

The WDF is an HMRC digital service allowing taxpayers to disclose offshore non-compliance in relation to their overseas interests. Any individual, company or trustee can make a disclosure through the WDF, including those who are non-UK resident.

Why disclose under the WDF?

Under the Common Reporting Standard (CRS), HMRC receives financial information from over 100 different countries. This information is used to check against the declarations made by UK taxpayers to identify potential offshore non-compliance. An example would be where a taxpayer has filed tax returns containing inaccuracies in relation to offshore irregularities. Or where a taxpayer has failed to notify chargeability to tax, and hasn’t filed a tax return declaring offshore income, profits and/or gains.

By making a disclosure through the WDF, you’ll have more control over the process, and you’re likely to reach a settlement quicker than if HMRC were to open an investigation. This is because you determine the potential lost revenue, the behaviour that led to the offshore non-compliance, and the level of tax-geared penalty.

What is an HMRC ‘nudge’ letter regarding offshore non-compliance?

The purpose of an HMRC ‘nudge’ letter is to prompt taxpayers to review their UK tax affairs in relation to their overseas interests, and correct any irregularities voluntarily by submitting a WDF disclosure.

What should you do if you receive a ‘nudge’ letter?

Firstly, do not ignore the letter. It’s likely that HMRC has information regarding your offshore interests and suspects there are irregularities in your UK tax affairs. To ensure you’re fully compliant, we would suggest you consult an expert in determining offshore non-compliance. We assist our clients by conducting a full review of their onshore/offshore tax affairs so we can advise on the best response to the HMRC ‘nudge’ letter, and whether a disclosure will be required.

What is the WDF process?

1. Registration – This notifies HMRC of your intention to make a WDF disclosure. Within 15 days, HMRC will confirm receipt and issue a disclosure reference number (DRN). Should you register for the WDF unprompted by any HMRC intervention or ‘nudge’ letter, then your ‘unprompted’ status is protected, meaning potential lower penalties.

2. Disclosure – The WDF disclosure must be submitted within 90 days of HMRC having confirmed registration and the DRN. The WDF disclosure should include:

• The unreported income and/or gains. 
• The associated tax, interest and penalties.

3. Payment – this must be made at the time of submission, unless a time to pay arrangement has been agreed with HMRC.

Penalties

To encourage taxpayers to disclose offshore income, HMRC introduced the Requirement to Correct (RTC), giving taxpayers until 30 September 2018 to make a disclosure. WDF disclosures made after this deadline, when disclosing irregularities for tax years up to and including 2015/16 , are subject to Failure to Correct (FTC) penalties. FTC penalties are significantly higher than standard offshore penalties, but can be reduced through submitting an unprompted disclosure, making it even more crucial to disclose irregularities as soon as you’re aware of them, and before HMRC nudges or prompts you to disclose.

The maximum penalty for a prompted disclosure under FTC is 200% of the unpaid tax. By submitting a full and accurate disclosure, an FTC penalty can be reduced to 150%. 

The minimum penalty for an unprompted disclosure under FTC is 100% of the unpaid tax, provided the disclosure is full and accurate.

When disclosing irregularities for tax years after 2015/16, standard offshore penalties will apply. These penalties depend on the category of the territory your offshore interests relative to the disclosure falls under, as well as your behaviour, and if the disclosure has been prompted by HMRC.

Reasonable excuse

Under the RTC, harsher penalties will be charged, unless the taxpayer can show that they had a reasonable excuse for not disclosing irregularities by the 30 September 2018 deadline. These are the circumstances HMRC has stated will not constitute a reasonable excuse for not disclosing irregularities:

• An insufficiency of funds is not a reasonable excuse, unless attributable to events outside your control.
• Relying on any other person to do anything. That cannot be a reasonable excuse unless you took reasonable care to avoid the failure.
• Where you had a reasonable excuse but the excuse has ceased. You are only to be treated as continuing to have the excuse if the failure is remedied, without unreasonable delay, after the excuse ceased.
• Relying on advice in certain circumstances.

How we can help

Buzzacott’s award-winning Tax Investigations and Dispute Resolution team can guide you through the WDF process. Our disclosure experts have a proven track record of assisting clients with offshore non-compliance matters. Should you choose to get specialist advice from Buzzacott, we will:

• Conduct a review of your tax affairs to identify any issues that need to be disclosed.
• Register you for the WDF process. 
• Prepare and submit a WDF disclosure that minimises your exposure to unnecessary tax, interest and penalties.
• Where appropriate, deliver a letter of representations to explain your position to HMRC to bring your disclosure to a swift conclusion.
• If needed, negotiate a time to pay arrangement that is affordable according to your needs and personal circumstances.