HM Revenue & Customs (HMRC) has announced the creation of a new Worldwide Disclosure Facility (WDF) that will allow people to ensure their affairs are correct before the Common Reporting Standard (CRS) comes into force on in October 2018.
The WDF is available to all UK and non-UK resident businesses, organisations and individuals that have a previously undeclared UK tax liability from an overseas source or from a UK source that was later transferred to another country.
The WDF will allow taxpayers to make a full voluntary disclosure of any overseas assets which may be impacted by the new Standard.
Any person or entity with tax liabilities, relating to all direct taxes and Inheritance Tax, dating back up to 20 years will be able to make use of the facility, which is not a direct replacement for the former Liechtenstein Disclosure Facility (LDF) that closed on 31 December 2015.
Unlike the LDF, the WDF does not benefit from limitation of the period required to be disclosed or reduced penalties and there is no scope for VAT to be disclosed.
Failure to act could result in significant penalties or even criminal investigation if the offence is deemed serious enough. Under the new legislation HMRC will also introduce new sanctions for “requirement to correct” or “failure to correct”.
A voluntary disclosure made through the WDF must include the tax, interest and penalties due, in line with legislation in force at the time the tax arose.
Those that use the facility on a voluntary basis will receive lower penalties than if the disclosure were prompted by an HMRC enquiry.
HMRC will have the right to deny access to the facility, to review the penalty loading and to investigate the disclosure further, particularly if it is made subsequent to a previous HMRC enquiry.
Those that submit voluntarily are not guaranteed immunity from criminal prosecution, however historically HMRC have generally not pursued a criminal investigation when a voluntary disclosure has been made.
HMRC has reiterated that the WDF is the final opportunity to make a voluntary disclosure to HMRC before the automatic exchange of information comes into force.
HMRC will start to receive details on overseas assets, income and gains in May 2017 and will continue to receive information throughout 2018.