Worldwide Disclosure Facility (WDF): How to Settle Undisclosed Offshore Income, Gains or Assets

14/11/2020 - 7 minutes read
Worldwide Disclosure Facility (WDF): How to Settle Undisclosed Offshore Income, Gains or Assets

How to Settle Undisclosed Offshore Income, Gains or Assets

The Worldwide Disclosure Facility (WDF) is a mechanism to make a voluntary disclosure relating to ‘offshore interests’.

  • – HMRC has increased its focus on the ‘tax gap’ and ever-increasing transparency across global tax authorities in an attempt to end tax evasion.
  • – It is, therefore important for you to ensure you are fully tax compliant, or you could face severe penalties from HMRC.
  • – This needs to be done whether you are an individual, company or a Trustee.

Over 100 countries have committed to exchange information on a multilateral basis under the Organisation for Economic Co-operation and Development’s Common Reporting Standard (CRS).

CRS increases international tax transparency.

On 31 December 2015, all HMRC offshore facilities closed. Up to that date, HMRC gave incentives to encourage people to come forward and clear up their tax affairs.

The WDF opened on 5 September 2016. On 1 October 2018, new sanctions under Requirement to Correct were introduced to reflect HMRC’s toughening approach.

Who can use the Worldwide Disclosure Facility?

Anyone who wants to disclose a UK tax liability that relates wholly or partly to an offshore issue can use the Worldwide Disclosure Facility. An offshore issue includes unpaid or omitted tax relating to:

  • – income arising from a source in a territory outside the UK
  • – assets situated or held in a territory outside the UK
  • – activities carried on wholly or mainly in a territory outside the UK
  • – anything having an effect as if it were income, assets or activities of a kind described above

It also includes funds connected to unpaid or omitted UK tax that you have transferred to a territory outside the UK or are owned in a territory outside the UK.

If at any time HMRC knows or suspects that assets or funds included in your disclosure are wholly or partly made up of criminal property, HMRC has the discretion to refuse your application to take part in the Worldwide Disclosure Facility.

HMRC will refer all disclosures made by taxpayers currently under enquiry, including all disclosure of tax avoidance schemes arrangements to the investigating officer to decide if they can accept them.

If you have made a settlement following an in-depth enquiry or disclosure before, HMRC will consider your new disclosure for further investigation and if it covers the same period, you may face a higher penalty.

If you’re unsure if you meet the eligibility criteria for the facility, you must seek professional advice.

If you’re not resident in the UK, you can still make a disclosure if you meet the eligibility criteria above.

If you’ve had a letter about your money or assets abroad

You’ll need to use this facility if you get a letter about your money or assets abroad, have checked your tax affairs, and find you need to make a disclosure.

Usually, the Hmrc letter will state “We have information that shows you may have received overseas income or gains that you may have to pay UK tax on. We have received this information through UK’s tax information exchange agreement with other countries”. The letter also asks for a certificate of tax position to be completed and returned to Hmrc.

We have recently assisted a large number of clients who have received correspondence from HMRC regarding their offshore income or gains which are taxable in the UK but the clients weren’t aware that they had to declare such income on their tax returns.

Examples include clients with foreign bank accounts where they received bank interest as well as dividends received from foreign companies. A lot of clients have NRE and NRO bank accounts in India which are used to hold Indian Rupees in the NRE account and fixed deposits in INR.

We have also heard from a lot of clients who have moved from Hong Kong to UK and have missed to declare their bank interest, dividend & rental income from Hong Kong on their UK tax return.

If you have received such correspondence from HMRC then please get in touch with us to discuss next steps.

Whether the worldwide disclosure relates to bank interest earned in India from private banks such as HDFC Bank, ICICI Bank, Bank of Baroda etc. or if the undisclosed income relates to dividend on Swiss shares from a multinational employer such as UBS, we are here to help!

We provide a comprehensive service to individuals, businesses and companies. Our relationship with you and your advisors is built on trust and mutual respect.

We will always give you an honest appraisal of your position, including potential fees, whether it is favourable or not.

Our team is accessible and approachable, and ready to answer your questions, giving you the confidence you need when dealing with a sensitive issue such as an HMRC enquiry or other tax dispute.

Contact MCL Accountants on 01702 593 029 to optimise your tax position or if you need any assistance with your Worldwide Disclosure facility and making full disclosure to HMRC.

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