• Worldwide Disclosure Facility (WDF) – helping to settle offshore matters

    Our Tax Dispute Resolution experts can support you through the WDF process.

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Worldwide Disclosure Facility (WDF) – helping to settle offshore matters

09 April 2021

The Worldwide Disclosure Facility, or WDF, is a process of voluntary disclosure to HMRC where UK taxes are due in relation to offshore matters. We say it is a well-trodden path as the facility has been open since 2016, and is modelled on previous disclosure opportunities, some of which offered partial amnesty terms.  However, following increased international transparency, the UK government now encourages voluntary disclosure but under normal UK tax rules.  This follows information from over 100 countries passing to the UK under the Organisation for Economic Co-operation and Development’s Common Reporting Standard (CRS).  

On 1 October 2018, new sanctions under Requirement to Correct (“RTC”) were introduced to reflect HMRC’s tougher stance, in particular higher penalties for Failure to Correct.

BDO’s Tax Dispute Resolution team is a national group of over 40 qualified and regulated tax professionals specialising in tax investigations and voluntary disclosure work.  We offer a bespoke service with discreet and confidential small teams to run your case including partner-led advice. When it comes to WDF, CRS, RTC, FTC and any other acronym in tax, we have years of experience!

We represent taxpayers with HMRC through the process, often working alongside your regular accountant or other professionals such as lawyers, trustees or executors. There are lots of ways we support and guide taxpayers to settlement of the process. 

Here are 5 main reasons why you need a Tax Dispute Resolution expert to support you through the WDF process.

  1. Failure to correct penalties. These were introduced in October 2018 and apply specifically to offshore related matters. Generally HMRC is looking to charge a 200% penalty in WDF cases. We can help make representations where the facts support the case that the penalties should be lower. Cooperation and full disclosure with HMRC through a professional adviser will also help to reduce penalties.
     
  2. No immunity from prosecution. In the small print of the WDF it does make the point that the process provides no immunity from criminal prosecution. Tax evasion is a criminal offence. As such a professional adviser who regularly deals with voluntary disclosures to HMRC can help assess the risks in each specific case and ensure the most appropriate disclosure process is used. Other disclosure processes, specifically the Contractual Disclosure Facility or Code of Practice 9, with HMRC do provide immunity from prosecution. It is important to get advice upfront about the most appropriate process for you given the significant risks and safeguards.
     
  3. Time limits and behaviours - do you need to go back 20 years? The UK tax legislation includes three main categories of behaviours: innocent, careless (similar to negligence) and deliberate (similar to fraud) behaviour. These behaviours are linked to the three main time limitations to charge back taxes, either four, six or twenty years respectively. Time limits were then extended and changed for offshore related matters, including a new twelve year rule in certain offshore cases. This is a particularly complex area and certainly requires a TDR expert to understand and apply the relevant time limit.  It clearly also make a massive difference to amount of tax, late payment interest and penalties charged in WDF case.
     
  4. Tax treaties & Foreign Tax Credits. The good news is if you have paid tax in a country outside the UK you may well be entitled to a credit to reduce any further UK tax liabilities through the Worldwide Disclosure Facility. This will require an analysis of tax treaty arrangements between the countries and calculation of Foreign Tax Credits.  We have experience in this work, including working with BDO International to understand tax reporting in other countries.
     
  5. Reporting foreign investments in the UK. The fact is this is horribly complex and does require expert analysis. Even calculating rental income and expenditure accounts using UK rules can produce a different answer compared to the country of origin. Currency exchanges, UK tax year reporting to 5 April, the situs of assets and different rules for income and capital gains all add to the complexity. We are familiar with the different types of investment vehicles such as life insurance bonds, trusts, pension funds, tax-free wrappers, and foundations in terms of the UK tax implications, and the correct reporting for WDF purposes.  Rules will also be different if you are a non-UK domiciled individual on the remittance basis of taxation or have periods of non-UK tax residency.

We are currently hearing from many individuals who have recently received a nudge letter from HMRC regarding compliance with offshore matters, particularly recently in France, India, Italy, Spain and Portugal) which aim to prompt disclosures. Our TDR team is part of the BDO international private client global network. Where we need to contact tax professionals in other countries we can do that with a named individual and again offer a discrete service.

 

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