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.
As you will have likely heard in the press recently, a leak of confidential documents from Panamanian law firm Mossack Fonseca has brought fresh attention to offshore tax evasion through the use of tax havens. It is understood that eleven million documents were leaked from the law firm.
This latest leak together with mutual agreements between governments highlight the ever tightening net for such assets and shows the importance of voluntary disclosure before being “caught” by HMRC.
HMRC have made numerous attempts in the last few years to bring taxpayers back into the system with various offshore disclosure facilities. These have now largely come to an end; however voluntary disclosure should still be pursued as the penalties involved are generally lower than those where HMRC make the first move. This is particularly important with offshore disclosures where the penalties can be up to 200% of the tax due in certain cases.
Eaves and Co have assisted with numerous offshore disclosures and would be happy to help if you have concerns.
HMRC have announced that they intend to introduce a new powers making it easier for them to prosecute failure to declare untaxed offshore assets.
At present, HMRC need to prove that individuals who have undeclared offshore income has intent to evade tax, in order for a criminal conviction to be successful.
Under the proposed new plans, HMRC would only have to show that the income was taxable and undeclared. A consultation will be published but the plans have not progressed this far yet.
These new proposals continue the recent trend to come down hard on offshore tax evasion and mean that anyone with undeclared offshore assets would be at risk of criminal prosecution. Affected individuals may wish to consider using one of the numerous offshore disclosure facilities currently available, before it is too late.
Eaves and Co have assisted with numerous offshore disclosures and would be happy to help if you have concerns.
Guernsey and Jersey signed Automatic Information Exchange Agreements with the UK on the 22 October 2013 – the ‘UK-Guernsey Agreement to Improve International Tax Compliance’ and the ‘UK-Jersey Agreement to Improve International Tax Compliance’. This means transparency between the tax authorities will be higher, and taxpayers trying to hide funds offshore will find that details are sent to HMRC.
The new agreements mean that all the Crown Dependencies have now entered into automatic tax information exchange agreements with the UK, with the Isle of Man having signed on 10 October 2013.
The net is closing in on taxpayers trying to evade tax, but for those wanting to come forward, beneficial disclosure regimes are still in operation in the Isle of Man, Guernsey and Jersey, as well as the on-going Liechtenstein Disclosure Facility.
Eaves and Co have assisted a number of clients with making disclosures of offshore income to HMRC and would be happy to hear from anyone wishing to come forward under these schemes.
Eaves and Co have assisted a number of clients to make disclosures under the Liechtenstein Disclosure Facility (LDF) as well as advice for those affected by the UK-Swiss Tax Treaty. HMRC have made clear that they continue to target offshore funds with more recent disclosure facilities in Jersey, Guernsey and the Isle of Man.
The LDF has been very successful for HMRC and they have even increased the expected yield from £1billion to £3billion.
We have written previously on the differences between the LDF and other disclosure facilities, in particular the more favourable guaranteed immunity from prosecution under the LDF.
A further, and often overlooked, aspect of the LDF which can be much more favourable than the other disclosure facilities is the ability to elect for a composite rate of tax rather than the actual rate. This can mean significant savings where Inheritance Tax is involved. As such, it might be worth those with funds in Jersey, Guernsey or the Isle of Man considering making a disclosure under the LDF where IHT is involved.
We would be delighted to hear from anyone seeking assistance in this area.
HMRC have written to tax advisors who have taken part in the Liechtenstein disclosure facility (LDF), informing them on common errors that lead to “unnecessary delays” in the system.
From 1 April 2013, HMRC have said they will be taking a more robust stance on whether LDF certificates are issued in such circumstances. Incomplete disclosures may be taken as a sign of lack of co-operation, leading to the withdrawal of the beneficial terms under the facility.
According to HMRC, the most frequently omitted items are:
- A narrative explanation detailing the background to the previously undisclosed items;
- Computations showing how the taxable figures in the disclosure have been arrived at;
- A fully completed certificate of full disclosure;
- The statement of assets and liabilities at the end of the final year covered by the disclosure;
- Completed letter of offer; and
- Full payment of the tax, interest and penalties due in the offer.
It is therefore essential to take suitable advice from experienced advisors, in order to ensure the terms of the LDF can be met. Eaves and Co have successfully completed a number of disclosures under the LDF and would be happy to assist.
This new tax year sees the opening of new tax disclosure facilities for offshore tax havens of Isle of Man, Jersey and Guernsey. They offer a streamlined disclosure method for offshore hidden funds with a laid down table of reduced penalties for tax errors.
In many ways these new tax treaties are similar to the Liechtenstein Disclosure Facility (LDF) which has been operating for some time now. It therefore makes sense to consider them in the light of experience and lessons learned from the LDF.
The new opportunities to disclose run from 6 April 2013 to 30 September 2016. Whilst 2016 currently sounds a long way off. It is surprising how fast time goes by. Experience with LDF suggests that people are liable to procrastinate, so the sooner they get relevant information, the more likely it is they will take appropriate action before it is too late.
Registering sooner rather than later gives greater protection, because HMRC enquiries continue, and those caught in an investigation are too late to take advantage of the benefits of reduced penalties and time scope of those disclosure schemes.
Whilst Accountants hope that all their clients are honest and do not need specialist disclosure facilities, as a firm dealing in serious tax investigations we see that such hopes are sometimes dashed. It is useful to make all clients aware of the disclosure facilities, because even the most honest ones may have funds or relations who requires help. Specialist advice is essential (we can help). Sometimes the happiest way forward can be just to provide the client with contact details, so that the existing client relationship is unaffected.
HMRC have announced the Property Sales campaign, a further new disclosure opportunity aimed this time at those with undisclosed taxable gains on residential property sales.
The disclosure campaign requires details of income and gains and the tax payable to be settled in full before 6 September 2013. After this date, HMRC will use the information they hold to target those who should have come forward under the campaign and did not do so.
HMRC states that reduced penalties will be levied on those who make a disclosure, but no firm details have yet been released. At present, a penalty calculator on the HMRC website refers to a maximum penalty of 20%.
This campaign marks a further step in HMRC’s drive to get taxpayers to come forward over undisclosed income and gains, following the recent announcement of the Isle of Man Disclosure Facility, the longer running Liechtenstein Disclosure Facility, and the UK-Swiss Tax Treaty amongst others.
A memorandum of understanding between the Isle of Man Government and the UK’s HM Revenue & Customs was signed on 19 February 2013 setting out the terms of a new agreement and disclosure facility between the two countries.
The financial world becomes steadily more transparent. Those with ‘hidden funds’ should beware. The UK Government is using Money Laundering regulations to pursue previously untaxed funds. The latest is with the Isle of Man Disclosure Facility. The agreements signed include an automatic tax information exchange and the setting up of a disclosure facility.
The Isle of Man Disclosure Facility will run from 6 April 2013 to 30 September 2016 in order for taxpayers with relevant investments in the Isle of Man to bring their tax affairs up-to-date.
The terms set out in the Memorandum suggest that the Isle of Man Disclosure Facility will bear some similarities to the Liechtenstein Disclosure Facility, including an April 1999 cut-off date, a guaranteed penalty rate of 10% for returns due to be filed before April 2009 and a proposed single point of contact.
There are some key differences however, including the fact that there will be no guarantee against criminal investigation for tax related offences.
Further confirmation will be needed but it appears that a qualifying connection to the Isle of Man could be established if an interest in relevant property is established at any time before 31 December 2013. This may mean that those with undisclosed income could transfer assets to the Isle of Man in order to take advantage of the beneficial tax treatment available.
Eaves and Co have successfully completed a number of disclosures under the Liechtenstein Disclosure Facility and will therefore be well placed to advise on the new Isle of Man Disclosure Facility if you are affected.
A copy of the Memorandum of Understanding can be found here, whilst the HM Treasury press notice can be viewed here.
As part of the agreement between the UK and Swiss governments which recently came into force, the UK-Swiss Tax Treaty, in an attempt to reduce evasion in Swiss bank accounts the Swiss have paid over the equivalent of £342m to the UK.
The payment is the first instalment of the levy on bank accounts held in Switzerland by UK taxpayers, designed to cover arrears on previously unreported income. The levy will apply to accounts in Switzerland unless the account holder allows the bank to disclose details to HMRC.
Current and future tax liabilities will be covered under the UK-Swiss Tax treaty and it is anticipated it will raise around £5bn in the next five years. Prior years will be covered by the levy whilst future years will be covered by witholding taxes within the accounts in Switzerland. In many cases, depending on the level of growth seen in the accounts, the levy under the treay can work out more expensive than other disclosure options, such as the Liechtenstein Disclosure Facility (LDF).
If you are interested in more details on the UK-Swiss Tax Treaty or the Liechtenstein Disclosure Facility, please contact us or take a look at our UK-Swiss Tax Treaty page.