Making a Disclosure Using the Worldwide Disclosure Facility

On 5 September 2016, HMRC introduced the Worldwide Disclosure Facility (WDF), offering a streamlined process for disclosing UK tax liabilities linked to offshore issues. This facility is open to anyone, regardless of residency status, who needs to disclose unpaid or omitted taxes related to income from non-UK sources, assets held abroad, or activities conducted overseas. The disclosure process involves notifying HMRC through the Digital Disclosure Service (DDS), obtaining a unique disclosure reference number (DRN), and submitting the necessary information within 90 days.

HMRC has recently been sending a large number of nudge letters to taxpayers who have failed to declare their worldwide income.  If you have received such a letter, it is crucial to respond to the letter within the deadline. Following is a sample of a nudge letter:

Who Can Use This Service?

The Worldwide Disclosure Facility is accessible to anyone who needs to disclose UK tax liabilities related entirely or partially to offshore matters. Offshore matters include any unpaid or omitted tax associated with:

• income from a non-UK source;
• assets located or held outside the UK;
• activities conducted outside the UK, and so forth.

As long as the eligibility criteria are met, anyone can use this facility to make a disclosure, regardless of their residency status.

An individual can disclose their tax liability as well as the tax affairs of a company, where they are a director or company secretary, trust or estate. Additionally, tax advisers or personal representatives may disclose information on behalf of someone else.

Separate notifications are required for each person making the disclosure. For example, if a husband and wife have undisclosed income, two separate disclosures must be made, each showing their respective share of undisclosed income.

Registering for the Service

The first step in making the disclosure using this facility is to notify HMRC of your intention to disclose the Digital Disclosure Service (DDS). Upon successful notification, HMRC will give a unique Disclosure Reference Number (DRN) that should be used when filing the disclosure.

Once notified, you will need to gather the necessary information to make the disclosure and calculate final liabilities such as tax, interest and penalties, within 90 days of notifying the HMRC.

HMRC requires certain information for notification and disclosure, which may include the applicant’s name, address, National Insurance number, Unique Taxpayer Reference, date of birth and more.

Notifying and Making the Disclosure

The disclosure must be made within 90 days of receiving the acknowledgement notification from HMRC. This acknowledgement will include the Disclosure Reference Number (DRN). One of the requirements for using the facility is that the full disclosure amount must be paid at the time of submission. The details of how to make the payment will be provided when completing the disclosure.

If the taxpayer cannot pay the owed amount immediately, they can arrange for a payment plan by contacting the Offshore Disclosure Facility before submitting their disclosure.

Individuals and Companies

Disclosing the tax affairs of individuals and companies follows the same process. For both, HMRC must be notified using the DDS form. Upon receiving the notification, HMRC will send a letter with a unique DRN, which will be used to contact HMRC about the status of the disclosure. The Payment Reference Number (PRN) provided by HMRC should be used to make the payment.

Agents

The procedure for agents disclosing the tax affairs of their clients is similar to the steps taken by individuals and companies. Clients of the agents can use the COMP1a form to authorise HMRC to deal directly with the agents. HMRC will ensure that agents have all the necessary information about their clients before disclosing their status.

Disclosing the Affairs of a Deceased

Executors and personal representatives wishing to disclose the tax affairs of someone who has died should also use the DDS form. The interested person must provide details on behalf of whom they are notifying. HMRC may ask for more evidence of your authority to act for the deceased if they are not satisfied.

The disclosure form will require taxpayers to disclose certain information, such as:

• whether your disclosure was prompted by a letter from HMRC;
• your DRN;
• in what capacity you are filing the disclosure;
• the designatory details of who the disclosure relates to;
• your contact details if you are completing the disclosure for someone else.

Taxpayers making the disclosure may also need to register for self-assessment or complete tax returns for future years not included in the disclosure.

Another requirement for voluntary disclosure is that taxpayers must assess their behaviour and the circumstances of their disclosure themselves. They must choose all the options that best fit their situation from the page shown below. Based on the selection, HMRC will present the years to which the disclosure relates.

On the subsequent page, taxpayers must enter the total income and gains they are disclosing across all taxes. If the records are incomplete, they must make the most accurate estimation of income or expenses without records. They must also describe the income or gain.

For the selected years, taxpayers must calculate and enter the total tax and duty due. It is their responsibility to calculate their tax liability. In addition to taxes, individuals must calculate the interest on all unpaid tax liabilities included in the disclosure. Interest should be calculated from the date the tax was due until the date it was actually paid.

If taxpayers are unsure about any of these calculations, it is advisable to seek professional advice.

Rejection of Disclosure

HMRC reserves the right to reject any application to make a disclosure. If HMRC has knowledge or suspicion that the assets in the disclosure are derived from criminal activity, such attempts at disclosure may be rejected. As part of this process, HMRC will review all disclosures made by the applicant to determine if the application should be accepted.

Conclusion

The Worldwide Disclosure Facility represents a crucial opportunity for individuals and entities to regularise their tax affairs related to offshore income and assets. By following the prescribed steps and ensuring full transparency, taxpayers can avoid severe penalties and legal complications. Given the complexities involved in calculating tax liabilities and the potential for HMRC to reject disclosures linked to criminal activities, seeking professional advice is highly recommended. Utilising the WDF not only ensures compliance with UK tax laws but also promotes financial integrity and peace of mind.