Worldwide Disclosure Facilities

The HMRC Worldwide Disclosure Facility (WDF) is a service designed to help taxpayers voluntarily disclose previously undeclared offshore tax liabilities. It aims to encourage taxpayers to come forward and disclose their offshore income, gains, or assets to HMRC before they identify the discrepancies through their investigations. Using the WDF, taxpayers can reduce penalties and avoid criminal prosecution.

The WDF is part of the UK government’s ongoing efforts to tackle tax evasion and ensure taxpayers pay the correct tax on their offshore income and assets. However, it is important to note that the WDF is not an amnesty program, and taxpayers who disclose their undeclared offshore income or assets may still be subject to financial penalties, although these penalties are generally lower than those that would be applied if the taxpayer had not voluntarily disclosed the information.

The WDF is available to individuals, businesses, trusts, and other entities with undeclared offshore tax liabilities relating to income, capital gains, or inheritance tax. It is open to UK residents and non-residents with a UK tax obligation arising from offshore activities. Taxpayers already under investigation by HMRC are not eligible to use the WDF, nor have those who have previously been offered the opportunity to disclose their offshore tax liabilities through another HMRC facility and have yet to do so. In addition, the WDF is not available to taxpayers eligible for the Contractual Disclosure Facility (CDF), specifically for those who have committed tax fraud.

Making a disclosure under the WDF involves a two-step process:

Step 1: The taxpayer must first register their intent to disclose through the Digital Disclosure Service (DDS) on the HMRC website. Upon successful registration, HMRC will provide the taxpayer with a unique Disclosure Reference Number (DRN) and a Payment Reference Number (PRN). The taxpayer will have 90 days from the date of notification to complete the disclosure process.

Step 2: The taxpayer must complete their disclosure by providing accurate and comprehensive information about their offshore tax liabilities, including details of income, gains, assets, and any tax due, using the DDS. The disclosure must also include a computation of the penalties payable. Finally, the taxpayer must fully pay the outstanding tax, interest, and penalties using the PRN provided.

Taxpayers who voluntarily disclose their offshore tax liabilities through the WDF may still face financial penalties, but these are typically lower than if HMRC discovered the discrepancies through its investigations. The minimum penalty for disclosure under the WDF is 30% of the tax due, which applies if the taxpayer has taken reasonable care in calculating their offshore tax liabilities but still made an error. Higher penalties may apply if the taxpayer has been careless (up to 70% of the tax due) or has deliberately concealed their offshore income or assets (up to 200% of the tax due). However, in some cases, a reduced penalty may be available if the taxpayer can demonstrate that they have made a full and voluntary disclosure and have cooperated with HMRC throughout the process.

If a taxpayer chooses not to disclose their offshore tax liabilities through the WDF and HMRC subsequently identifies undeclared offshore income or assets, the financial penalties can be significantly higher. In addition to paying the outstanding tax and interest, the taxpayer may face penalties of up to 200% of the tax due or even up to 300% in cases involving offshore assets worth more than £25,000 and where the taxpayer has moved those assets to avoid detection. Furthermore, the taxpayer may also face potential criminal prosecution for tax evasion. HMRC has a range of tools to identify undeclared offshore income and assets, including information exchanged under international agreements such as the Common Reporting Standard (CRS) and other data-sharing arrangements with foreign tax authorities. As a result, the risk of non-disclosure being detected by HMRC has significantly increased in recent years.

The WDF is designed explicitly to disclose offshore tax liabilities. For onshore tax liabilities, taxpayers should use HMRC’s other disclosure facilities, such as the Digital Disclosure Service (DDS) for general tax liabilities, the Contractual Disclosure Facility (CDF) for cases involving tax fraud, or the Let Property Campaign for landlords with undeclared rental income.

The WDF does not have a specific deadline or closure date. However, once taxpayers register their intent to make a disclosure using the Digital Disclosure Service (DDS), they will have 90 days to complete and submit the disclosure, including the payment of outstanding tax, interest, and penalties. If the disclosure is completed within this time frame, the taxpayer may retain the opportunity to benefit from the reduced penalties offered by the WDF.

 No, taxpayers must disclose their identity when making a disclosure under the WDF. While taxpayers can appoint a third party, such as a tax advisor or accountant, to act on their behalf, the disclosure must still be made in the taxpayer’s name. The appointed representative will be required to provide their details and confirm that they have the taxpayer’s authority to act on their behalf.

If a taxpayer has previously made a disclosure under another HMRC offshore facility, such as the Offshore Disclosure Facility (ODF) or the Liechtenstein Disclosure Facility (LDF), they are not eligible to use the WDF for the same tax liabilities. However, if the taxpayer has discovered additional offshore tax liabilities that were not included in their previous disclosure, they may use the WDF to disclose these new liabilities.