UK and International Tax news
HMRC Compliance Campaign And Overseas Tax Affairs
Monday 26th June 2023
HMRC have recently launched a new compliance campaign targeting taxpayers named in the Pandora Papers. It invites them to make use of the contractual disclosure facility or the worldwide disclosure facility.
During 2021 and 2022, the International Consortium of Investigative Journalists released more than 11 million records (the Pandora papers) from 14 offshore service providers. These providers specialise in incorporating companies, trusts, foundations and other entities in low or no tax jurisdictions.
HMRC has been using the information contained in the papers to identify UK taxpayers who may have taxable income or gains that have not been declared. HMRC’s letter invites recipients to update their tax affairs and reminds them that penalties of up to 200% may be charged on the tax due on any overseas income and gains not declared.
Taxpayers should inform HMRC of any undeclared UK tax liabilities in respect of all overseas income or gains within 30 days of the date of their letter. No action is needed however if a person’s tax affairs are correct and up to date.
When making a disclosure, taxpayers will need to use the correct disclosure facility. The CDF is only suitable for taxpayers who want to admit to tax fraud. By entering into the CDF, a taxpayer will need to admit that their deliberate conduct has brought about a loss of tax and tell HMRC about all the tax losses brought about by their deliberate conduct and provide as much detail within 60 days of being offered the contract. They will also need to provide additional details in the form of a report following the 60-day period together with a statement confirimng they have given HMRC complete and accurate details of their deliberate conduct. In turn, HMRC will agree not to criminally investigate with a view to prosecuting them for the deliberate conduct they admit to in the CDF contract.
The WDF is available to anyone who wants to disclose a UK tax liability 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, or anything having effect as if it were income, assets or activities of a kind described above. Under the WDF, the taxpayer must make a full disclosure of all previously undisclosed UK tax liabilities and calculate interest and penalties based on the existing legislation. Provided the disclosure is correct and complete and the taxpayer fully co-operates by supplying any further information requested, HMRC will not seek to impose a higher penalty except in specific circumstances.
The WDF Facility does not however provide any protection from prosecution. Where there has been deliberate and/or fraudulent conduct such as evasion, the CDF is the more appropriate facility.
If you would like further information on the above, please contact Keith Rushen on 0207 486 2378.
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