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UK taxpayers with offshore holdings could soon be subject to new legal obligations, with significant sanctions if they fail to comply. HMRC has also launched the Worldwide Disclosure Facility (WDF) to enable taxpayers to correct past irregularities in advance of the new sanctions being introduced.
The headlines are:
Requirement to Correct (RTC)
- HMRC announced a new consultation at the end of August 2016 which proposes a Requirement to Correct (RTC).
- Any person with UK tax irregularities related to offshore interests has a legal obligation to correct this and settle those liabilities.
- It is envisaged that RTC will encourage taxpayers to review their affairs and take advice as appropriate to assure themselves their offshore interests are tax compliant and if not to correct this.
- The correction must be made on or before 30 September 2018.
- By 30 September 2018 HMRC will be receiving CRS data (from circa 100 countries) which will allow it to identify and pursue those who have not come forward to regularise their affairs.
- Any person who is found to have failed to have corrected their affairs will be subject to a new set of sanctions.
- Under one proposal this would include penalties in the range of a minimum of 100% up to 200%, in addition a 10% asset based penalty and “naming and shaming” of those who failed to correct.
Worldwide Disclosure Facility (WDF)
- Opened 5 September 2016. Current terms run until 30 September 2018.
- Disclose UK tax liabilities that relate wholly or partly to an offshore issue. That is, income arising outside the UK, assets situated or held outside the UK, activities carried on wholly or mainly outside the UK or funds connected to a UK liability transferred outside the UK.
- No immunity from prosecution (need to consider Contractual Disclosure Facility on case by case basis, e.g. second offenders).
- 2 stage process using HMRC’s Digital Disclosure Service portal
2. Within 90 days of date notification confirmed require to:
- Complete disclosure
- Pay tax, interest and penalties
- Requirement to self-assess behaviour to determine years to include in disclosure and level of penalties.
- Complex issues and pre disclosure agreement - in exceptional circumstances clarification can be sought from HMRC pre disclosure submission using the non-statutory clearance process.
- No statement of assets and liabilities – instead need to set out the maximum value of overseas assets at any point in the last 5 years.
- Onshore liabilities should also be disclosed if WDF is being used.
- HMRC to acknowledge disclosure within 15 days and aim to tell course of action within 40 days of this.
- HMRC will check disclosures and investigate if necessary.
Voluntary Disclosure Opportunity (VDO)
- This was also announced on 5 September 2016.
- Open to those not able to use other campaigns to disclose.
- Deals with:
1. Income tax
5. Format then essentially follows the WDF regarding the process, eg, use of the Digital Disclosure Service, notification, disclosure, payment on submission of disclosure
- Separate disclosures needed for PAYE, VAT, IHT etc (ie not through the VDO)
In addition to the WDF and VDO there are other disclosure routes and anyone contemplating a disclosure will need to consider the most appropriate route to take. KPMG has extensive experience advising those with a requirement to disclose issues to HMRC.
Please contact us if you would like to discuss these recent developments further.