HMRC Worldwide Disclosure Facility (WDF) – Introduction
If you’ve received an HMRC ‘nudge’ letter or wish to regularize any undisclosed offshore income, you may need to make a disclosure using HMRC’s Worldwide Disclosure Facility (WDF).
Here’s what you need to know about the WDF and how we can help bring your tax affairs up to date.
What is the WDF?
The Worldwide Disclosure Facility (WDF) is an HMRC digital service that allows taxpayers to disclose offshore non-compliance related to their overseas interests.
This service is available to individuals, companies, and trustees, including non-UK residents.
Why Disclose Under the WDF?
Under the Common Reporting Standard (CRS), HMRC receives financial information from over 100 countries to check against the declarations made by UK taxpayers, identifying potential offshore non-compliance.
Examples include inaccuracies in filed tax returns or failure to notify chargeability to tax, leading to undeclared offshore income, profits, and gains.
By making a disclosure through the WDF, you maintain control over the process and are likely to reach a settlement quicker than if HMRC were to open an investigation. You determine the potential lost revenue, the behavior leading to non-compliance, and the level of tax-geared penalties.
HMRC ‘Nudge’ Letters Explained
An HMRC ‘nudge’ letter prompts taxpayers to review their UK tax affairs in relation to their overseas interests and correct any irregularities by submitting a WDF disclosure.
What Should You Do if You Receive a ‘Nudge’ Letter?
Do not ignore the letter. HMRC likely has information about your offshore interests and suspects irregularities in your UK tax affairs.
Consulting an expert is crucial in determining offshore non-compliance.
We assist our clients by reviewing their onshore/offshore tax affairs, advising on the best response to the HMRC ‘nudge’ letter, and determining if a disclosure is required.
Do Nudge Letters Always Mean You Owe Tax?
No. However, HMRC typically contacts individuals or businesses when it has information suggesting issues with their tax affairs. Our tax investigation specialists can help identify any irregularities and disclose them via the Worldwide Disclosure Facility.
Reporting Offshore Income/Gains
It’s not necessary to report income or gains that:
- Total less than the unused annual exemption or personal allowances
- Constitute dividends less than the unused dividend allowance
- Constitute interest less than the savings allowance
Reviewing past tax years may uncover potential tax reliefs previously overlooked. A full disclosure to HMRC via the WDF could potentially result in a net repayment if you’re still in time to claim such reliefs.
Making a Notification and Disclosure to HMRC
Inform HMRC of your intention to make a WDF disclosure as soon as you become aware of tax owed on any offshore income or gains.
Individuals can make a disclosure about their own taxes, their company’s taxes, a trust or estate, or on behalf of someone else. We can help you make a disclosure statement for yourself, your business, or other income-generating entities.
What to Include on the Disclosure Form
Disclosures detailing offshore liabilities must include:
- Your disclosure reference number (DRN)
- Whether the disclosure was prompted by an HMRC letter
- The capacity in which you’re completing the form
- Who you’re disclosing for, if not yourself
- Your contact details if disclosing for someone else
- Confirmation of making a full disclosure
- Acknowledgement that false disclosures could lead to prosecution
The WDF Process
Registration
Notify HMRC of your intention to make a WDF disclosure. HMRC will confirm receipt and issue a disclosure reference number (DRN) within 15 days. Registering unprompted by HMRC intervention protects your ‘unprompted’ status, meaning potentially lower penalties.
Disclosure
Submit the WDF disclosure within 90 days of HMRC confirmation and receipt of the DRN. Include:
- Unreported income and/or gains
- Associated tax, interest, and penalties
Payment
Payment must be made at submission, unless a time-to-pay arrangement is agreed with HMRC.
Penalties
To encourage disclosures, HMRC introduced the Requirement to Correct (RTC), giving taxpayers until 30 September 2018 to disclose.
Disclosures after this deadline for tax years up to 2015/16 are subject to Failure to Correct (FTC) penalties, which are significantly higher than standard offshore penalties but can be reduced through unprompted disclosure.
Reasonable Excuse
RTC harsher penalties apply unless you show a reasonable excuse for not disclosing by the 30 September 2018 deadline.
HMRC has stated circumstances that do not constitute a reasonable excuse, such as insufficiency of funds unless due to events outside your control, and reliance on another person unless reasonable care was taken to avoid the failure.
Benefits of Disclosing via the WDF
Voluntary disclosure of offshore income or gains via the WDF offers numerous benefits:
- Proactive error correction
- Demonstrates responsibility to HMRC
- Potential reduction in assessed years and associated penalties
- Protects reputation and personal freedom
Why Use a Specialist?
Penalty Reduction
Specialists can argue for lower penalties based on full disclosure and cooperation with HMRC.
Time Limit Complexities
Experts navigate behavior categories and associated time limits, minimizing unnecessary tax, interest, and penalties.
Criminal Prosecution?
WDF doesn’t offer immunity from prosecution. Disclosures involving tax evasion and fraud should be handled via the Contractual Disclosure Facility or Code of Practice 9.
Final thoughts on HMRC Worldwide Disclosure Facility (WDF)
If you have any queries about HMRC Worldwide Disclosure Facility (WDF), or UK tax matters in general, then please get in touch.