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 recently purchased advertising pointing out that offshore income and gains may be taxable in the UK. This is true. In general, for UK domiciled residents, all worldwide income and gains are taxable (even where you reinvested the proceeds and did not remit them to the UK). For non-residents, UK source income may be taxable.
This is where it gets complicated (as if it was not before!). Like many other matters in the international tax world, circumstances can alter cases . Domicile, double tax treaties and all the new statutory residence test may all have an impact.
If you have offshore assets, review them now, before HMRC really clamp down next tax year. If in doubt, seek tax expert advice.
In an interesting twist to the European Question, the EU authorities have just issued a decision on the advance tax ruling given to Starbucks by the Dutch Revenue, helping Starbucks avoid tax in other jurisdictions. This was done by Starbucks having higher tax deductible costs with a lower tax rate in the Netherlands, thus meaning there was only immaterial profit in countries such as the UK, so minimal UK corporation tax. The EU Authorities feel this amounted to illegal State Aid, such that Starbucks should be enforced to repay it in full.
The political question is whether this is:
a) A good example to tax abuse by multinational corporations?
b) An unacceptable interference in Dutch sovereignty because tax is not supposed to be controlled at EU level?
Is that the smell of coffee or the protagonists’ lawyer preparing their morning shot of napalm?
Following the UK-Swiss Tax Treaty which was signed in October 2011, Swiss banks are now sending letters to all account holders that have a connection to the UK and may therefore be liable to tax charges under the UK-Swiss Tax Treaty.
Some banks have already posted the letters, whilst others will send them out during the next month or so. Eaves & Co have already been contacted by concerned taxpayers in receipt of letters from their Swiss bank.
If you/your client receive letters regarding the UK-Swiss Tax Treaty then you should ensure that swift action is taken if you wish to avoid the one off levy in May 2013 and on-going withholding taxes.
Where there are undisclosed tax liabilities in issue then it will be necessary to consider whether to continue under the withholding system set out in the UK-Swiss Tax Treaty and retain anonymity or make a disclosure to HMRC – perhaps by taking advantage of the Liechtenstein Disclosure Facility (LDF).
It is important that clients with no undisclosed liabilities do not simply ignore the letters because the terms of the UK-Swiss Tax Treaty mean that the Swiss bank will need to receive confirmation from a UK tax professional certifying that the income has been disclosed to HMRC (or that the taxpayer is non UK domiciled and claims the remittance basis so disclosure is not required) before they can dis-apply the one off levy and annual withholding tax.