23 September 2016 by

HMRC provides amnesty international for off-shore interests

As part of the Government’s clamp down on tax evasion and non-compliance, HMRC has launched a new amnesty scheme, called the Worldwide Disclosure Facility, to give individuals and companies in the UK one last chance to regularise their offshore interests.  Under the WDF amnesty, it will be possible to voluntarily disclose any previously non-disclosed off-shore interests and correct any previous omissions or mistakes on past declarations regarding overseas income and gains.

Worldwide Disclosure Facility (WDF)

The WDF which commenced on the 5th September offers a final opportunity for UK taxpayers with unresolved offshore tax issues to legitimise their off-shore arrangements.  This WDF amnesty facility will be available until September 2018 and, unlike previous disclosure facilities (such as the Liechtenstein Disclosure Facility), will not offer concessions on the penalty provisions.  This change in attitude reflects HMRC’s growing confidence that they will soon have the tools to more effectively tackle offshore tax evasion.  The severe penalties and sanctions which are expected to come into force after the amnesty expires in September 2018 should serve as incentive enough to use the WDF.

As Jennie Granger, the HMRC Director General of Enforcement and Compliance has stated: “Our message is simple – come to us, pay the tax and penalties that are due, before we target you with the introduction of even tougher sanctions and game-changing data.

Common Reporting Standard

Linked to the WDF amnesty is the UK’s adoption of the Common Reporting Standard (CRS) which is part of an international agreement the UK has with other participating countries to clamp down on international tax evasion by allowing member countries to share information on each other’s tax payers.  The CRS will allow HMRC and other overseas tax authorities in participating countries to automatically exchange information, and will give HMRC unprecedented access to information about UK taxpayers who have assets and wealth invested overseas.  By 30 September 2018 HMRC will be receiving CRS data from nearly 100 countries, which will allow them to identify and pursue those who have not come forward to regularise their affairs under the WDF amnesty.

Requirement to Correct

The Government has also recently published a new consultation document proposing a Requirement to Correct (RTC). The RTC, which is expected to be introduced in the Finance Bill 2017, will place an obligation on those who have undeclared UK liabilities relating to offshore interests to put their past affairs in order by the 30th September 2018. This will include unpaid or omitted tax relating relating to:

  • income arising from a source in a territory outside the UK
  • assets situated or held in a territory outside the UK
  • activities carried on wholly or mainly in a territory outside the UK, or
  • where funds connected to a tax loss not within the above are received or owned in a territory outside the UK or are transferred to a territory outside the UK.

The sanctions for a ‘failure to correct’ will be severe and it is expected that those who are found to have undeclared offshore investments and accounts following the end of the RTC period in September 2018 may face tough penalties of up to 200% of the tax evaded, although the exact details of the sanctions are yet to be confirmed by HMRC.

If you or your clients are considering how best to disclose historic off-shore tax arrangements to HMRC, please contact one of our solicitors in the Wealth Planning team here.

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