HMRC have announced the Worldwide Disclosure Facility (WDF) the latest in a long line of disclosure facilities designed to encourage taxpayers to come forward to disclose previously unreported offshore tax liabilities.

Unlike its predecessors, the WDF does not offer any favourable terms, other than the fact that HMRC state that where the disclosure is correct and complete and the taxpayer fully co-operates by supplying any further information they ask for to check the disclosure, they’ll not seek to impose a ‘higher penalty’, except in specific circumstances (e.g. where the taxpayer was already under enquiry) and they will also agree not to publish details of the disclosure. This last ‘benefit’ may appeal to higher profile individuals who may prefer to remain anonymous in their previous failures.

This is a marked difference to previous disclosure facilities that offered much reduced penalties (such as the 10% rate offered by the Liechtenstein Disclosure Facility) and guarantees against prosecution.

The WDF is targeted as a ‘last chance’ by HMRC before even more strict penalties come into force, as well as their claims that automatic exchange and data from the Organisation for Economic Co-operation and Development Common Reporting Standard (CRS) will then be available.

After 30 September 2018, new sanctions will be introduced that reflect HMRC’s “toughening approach”. They state that you will still be able to make a disclosure after that date “but those new terms will not be as good as those currently available”.

Previous experiences suggest that making a disclosure under one of HMRC’s facilities is usually a more streamlined process compared to simply writing to HMRC.

Eaves and Co would be very happy to discuss matters if you are concerned that you or your clients may have an undisclosed offshore liability, suitable for the Worldwide Disclosure Facility. We have extensive experience of making disclosures under previous facilities that HMRC have offered.

In the recent case of Mr Shakoor v HMRC, the appellant had failed to disclose the sale of two flats in July 2003 which resulted in significant capital gains. HMRC subsequently raised a discovery assessment for CGT of £49,014 plus a penalty of 70%.

The appellant contended the penalty on the basis that he had taken reasonable care by seeking advice from his accountant. He said the failure to disclose the gain was as a result of negligent advice from his accountant.

The accountant did advise that there was no CGT to pay, and that the disposal of the properties was not reportable on the tax return. However the accountant kept no notes of his advice but said he had relied upon two extra-statutory concessions relating to private residence relief. These clearly did not apply as the appellant had never resided in either property but the taxpayer asked for no explanation of this advice.

The Tribunal found that the taxpayer must have been aware that CGT was due on the properties, and it appeared to be “a case of shutting one’s eyes to what either was or ought reasonably have been seen as incorrect advice”.

The Tribunal did in fact cut the penalty to 30% giving the appellant the “benefit of the doubt” as a result of the poor advice given by his adviser. It observed that the appellant was content to “take a chance on the basis that his accountant had given him comfort, albeit in the rather dubious circumstances”