1. Services

Worldwide Disclosure Facility (WDF)

The WDF is a digital service offered by HMRC that allows taxpayers to report offshore non-compliance in relation to their overseas interests.

WDF allows anyone, including non-UK residents, to make a disclosure.

Is there a reason to disclose under the WDF?

HMRC receives financial information from over 100 countries under the Common Reporting Standard (CRS). This information is used to check against the declarations made by UK taxpayers to identify potential offshore non-compliance. An example would be where a taxpayer filed tax returns containing inaccuracies regarding offshore irregularities. Taxpayers who have failed to declare offshore income, profits, and/or gains on their tax returns may be liable for tax.

The WDF gives you greater control over the process, and you’ll likely reach a settlement quickly rather than if HMRC initiated its own investigation. In this case, you will determine the potential loss of revenue, the behavior that resulted in offshore non-compliance, and the level of a tax-geared penalty.

Why does HMRC send 'nudge' letters regarding offshore non-compliance?

An HMRC 'nudge' letter encourages taxpayers to review their UK tax affairs in relation to their overseas interests, and correct any irregularities voluntarily by submitting a WDF disclosure.

If you receive a letter called a 'nudge,' what should you do?

First of all, don't ignore this letter. It's likely that HMRC has information about your offshore interests and suspects irregularities in your UK tax affairs. We recommend consulting an expert in determining offshore non-compliance if you want to make sure you are fully compliant. As part of our services, we assist our clients by reviewing their onshore/offshore tax affairs, so that we can advise on the best response to the HMRC 'nudge' letter, as well as whether a disclosure is necessary.

How does the WDF process work?

1. The registration process notifies HMRC of your intention to make a WDF disclosure. HMRC will confirm receipt and issue a disclosure reference number (DRN) within 15 days. Your 'unprompted' status is protected if you register for the WDF without any HMRC intervention or 'nudge' letter.
2. The WDF disclosure must be submitted within 90 days of HMRC confirming registration and the DRN. WDF disclosures should include:
   • Gains and/or income not reported.
   • Taxes, interest, and penalties associated with them.
3. In the absence of an agreement with HMRC, payment must be made at the time of submission.

Fines and penalties

As part of its Requirement to Correct (RTC), HMRC gave taxpayers until 30 September 2018 to disclose offshore income. Failure to Correct (FTC) penalties apply to WDF disclosures made after this deadline, when disclosing irregularities for tax years up to and including 2015/16. The FTC penalties are significantly higher than standard offshore penalties, but can be reduced through an unprompted disclosure. Consequently, it is even more important to disclose irregularities as soon as you become aware of them, and before HMRC contacts you.

Under the FTC, a prompted disclosure is subject to a penalty of 200% of the unpaid tax. It is possible to reduce an FTC penalty by 150% by submitting a full and accurate disclosure.

Unprompted disclosures under FTC carry a penalty of 100% of the unpaid tax, provided the disclosure is complete and accurate.

The standard offshore penalties will apply when disclosing irregularities for tax years after 2015/16. Penalties are determined by the category of offshore interests you hold relative to the disclosure, as well as your behavior, and if HMRC prompted the disclosure.

I have a reasonable excuse

If a taxpayer fails to report irregularities by 30 September 2018, harsher penalties will be imposed, unless they can show that they had a reasonable excuse. HMRC has stated the following circumstances will not constitute a reasonable excuse for not disclosing irregularities:

• Insufficient funds are not a reasonable excuse unless they are caused by events beyond your control.
• Relying on someone else for anything. You cannot use that as an excuse unless you took reasonable precautions to avoid the failure.
• Having a reasonable excuse that has ceased to be a valid excuse. If the failure is remedied within a reasonable timeframe after the excuse ceased, then the excuse continues to apply.
• In certain circumstances, relying on advice.

How we can help

Bolton Tax Accountants can assist you with the WDF process. We have assisted clients with offshore non-compliance matters in the past. we will:

• Review your tax affairs to determine if any disclosures are required.
• We will register you for the WDF process.
• Submit a WDF disclosure that minimizes your exposure to unnecessary tax, interest, and penalties.
• Whenever necessary, send a letter of representation to HMRC to explain your position.
• You may need to negotiate a payment plan that is affordable based on your needs.