This guide explains how you can disclose and make payments for your offshore investments and assets using the Worldwide Disclosure Facility.
There’s nothing wrong with having investments overseas as long as you declare all taxable income and gains on your UK tax return.
The government is getting tougher in its approach to tackling those who don’t declare the correct amounts of tax due on their offshore income and assets. New international collaboration to share information and laws to tackle non-compliance has started. However, there is still a chance to bring all your tax affairs up to date if you have worldwide income that’s not been taxed before.
Requirement to Correct
HM Revenue and Customs (HMRC) has launched a consultation on the Requirement to Correct. This is a consultation on proposals to introduce new legislation requiring any person who has undeclared UK tax liabilities in respect of offshore interests to correct that situation by disclosing the relevant information to HMRC.
HMRC expect the majority of cases meeting their obligation under the Requirement to Correct to be made via a disclosure, primarily through the Worldwide Disclosure Facility (WDF) and the new online Digital Disclosure Service (DDS) that went live on Monday 5 September 2016.
HMRC are proposing that the correction by 30 September 2018 will lead to payment of the outstanding tax, interest and any penalties due.
Undeclared income offshore
If you need help to decide whether you’ve paid the right amount of tax, ask your adviser if you have one. They can help you check your affairs and discuss the options if you need to make a disclosure to HMRC. For any further queries you can phone HMRC on Telephone: 0300 322 7012.
If you do have undeclared income and gains from your overseas accounts, go online to the DDS now to clear up your past tax affairs. You should also make sure that you declare all relevant income and gains in your next Self Assessment tax return.
If you’re not resident in the UK for tax purposes (a UK taxpayer) you may still have to pay tax in the UK on some income and gains. You should check what’s taxable and check your residency status.
Why you should disclose now
Over 100 countries have committed to new international agreements that will let HMRC see more about overseas accounts held by you. If you have declared your taxable income and gains then you have nothing to worry about. But if you haven’t, and HMRC finds out you will face an investigation and will have to pay the undeclared tax, a penalty of up to double the tax you owe, and could even go to prison.
Using the WDF to make a full disclosure of all undeclared offshore liabilities may avoid the need for an investigation in the future where you may pay a higher penalty.
Financial institutions are already collecting information on your overseas accounts.
HMRC will get much more information about your:
- overseas accounts
- insurance products
- other investments, including those held through overseas structures such as companies and trusts
The information includes details of either:
- who’s holding the account or asset
who owns the entity holding the asset including their:
- date of birth
- the balance of the account
- payments made into it
HMRC will use this information to go after those who’ve not paid their taxes, so go to them before they come to you.
Worldwide Disclosure Facility
If you haven’t paid the right amount of tax you may be able to tell HMRC using a disclosure facility.
The WDF launched on 5 September 2016 and is available to anyone who is disclosing a UK tax liability that relates wholly or in part to an offshore issue. This includes:
- 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 tax are transferred outside the UK
Agents wishing to make a notification for a client should use the agent disclosure online service.
Who will be eligible to use the facility?
Anyone who wishes to disclose a UK tax liability that relates wholly or in part to an offshore issue is eligible to use the facility under the terms.
The terms are:
- to make a full disclosure of all previously undisclosed UK tax liabilities within 90 days of notifying your intention to disclose
- calculate interest and penalties due based on the existing legislation
In specific circumstances it may not be appropriate to allow full reductions for disclosure. For example where a person has taken a significant period to correct their non-compliance, or, they would previously have been able to make their disclosure through one of HMRC’s offshore facilities they can no longer expect HMRC to agree full reduction for disclosure. In such cases it is unlikely that HMRC would reduce the penalty more than 10 percentage points above the minimum of the statutory range. For this purpose we would normally consider a ‘significant period’ to be over three years or less where the overall disclosure covers a longer period.
The WDF is aligned to this updated treatment and guidance.
What to do next
You can make a disclosure online via the DDS and you will first need to notify your intention to disclose.
You only need to tell HMRC that you will be making a disclosure. Once you have notified an intention to make a disclosure, you will have 90 days to:
- collate the information needed to complete the disclosure
- calculate the final liabilities including tax, duty, interest and penalties
- complete the disclosure, using the unique disclosure reference number provided when notifying
Details of the previous facilities now closed by HMRC are here.
The Liechtenstein Disclosure Facility (LDF)
The LDF was available to anyone who owned an asset in Liechtenstein at the time that they registered to use the LDF. It didn’t matter when you acquired the asset in Liechtenstein provided you owned it when you registered.
The 3 British Crown dependencies’ facilities
The 3 British Crown dependencies’ facilities were:
- Isle of Man
They were available to anyone who owned an asset in the relevant territory at any time between April 1999 and 31 December 2013.
Published: 15 December 2014
Updated: 5 September 2016
- Multiple amendments to this guidance to incorporate the Worldwide Disclosure Facility go live on the 5 September 2016.
- Information on the Worldwide Disclosure Facility has been added to this page which will open on 5 September 2016.
- The disclosure facilities closed to new applications on 31 December 2015
- Contact name changed.
- First published.