Do you have undisclosed income (Offshore Income) and gains from outside the UK?

The Worldwide Disclosure Facility is applicable to anyone who is going to disclose a UK tax liability and have UK tax to pay and also has overseas income or assets that haven’t been declared to HMRC. Income could include overseas interest, dividend, rent from overseas properties, wages, benefits or royalties earned outside of the UK or any assets held or disposed of overseas.

HMRC is exchanging information through CRS with more than 100 countries. CRS is a globally recognised standard designed for the automatic exchange of information on financial accounts. It requires financial institutions, certain relevant persons, including professional businesses providing tax advice to identify financial accounts held by customers with a tax residence in another state or jurisdiction other than its own. The main purpose of CRS is to stop international tax evasion.

This applies to Income tax, Capital Gains Tax (including Non-residents CGT) and Inheritance Tax.

HMRC is exchanging information on the financial accounts of individuals, trusts and businesses with more than 100 other countries. It makes easier for them to identify those who have not paid the correct tax on their offshore income and assets. If you make an unprompted disclosure the penalties could be reduced.

Firstly, take it seriously. HMRC has found a potential issue in your offshore tax affairs – could open an enquiry and could back up to 20 years if the income was deliberately not disclosed to HMRC. The irregularity may be easily explained and disclosed, but HMRC is likely to escalate its enquiries if you don’t reply.

No, if there is double tax treaty available with that country, you won’t end up paying tax twice, and will most likely receive credit for the tax you have paid in that country.

But yes, you need to show in your UK return. If you are resident and domiciled in the UK, you will pay UK tax on arising basis. It means that you have to pay tax on your worldwide income and gains whether or not you remit the foreign income or proceeds from foreign gains to the UK.

The number of years, you need to disclose, will be subject to your understanding of when you should have told HMRC about your offshore income or gains. It is advisable that all years with non-compliance are disclosed or HMRC could potentially open enquiries, which could make matters worse.

The number of years, you need to disclose, will be subject to your understanding of when you should have told HMRC about your offshore income or gains. It is advisable that all years with non-compliance are disclosed or HMRC could potentially open enquiries, which could make matters worse.

For correcting affairs, you have to notify HMRC of your intention to make a disclosure, HMRC will give you a unique disclosure reference number and once you have notified, they will provide you 90 days to make the full disclosure and pay any tax owed gather together the information you need to complete your disclosure.

HMRC did run a campaign called ‘requirement to correct’, which closed on 30 September 2018. From 1 October 2018, penalties will apply to any disclosure made and will depend on the behaviour.

The Failure to Correct (FTC) penalties are:

• A penalty of 200% of the tax payable – this may be reduced to a minimum penalty of 100% depending on taxpayer cooperation with enquiries and the quality of disclosure
• An asset-based penalty of up to 10% of the underlying asset (i.e. where the tax amount owed exceeds £25,000 in any tax year)
• An additional penalty (an additional 50% of the first penalty) for situations in which HMRC can show the taxpayer moved their assets to avoid reporting.

In addition to the above, you would also have to pay any outstanding tax and interest.

If you think that you have not told HMRC about UK tax due on foreign income or gains or if you have received a letter from HMRC on the same, you can contact HMRC on the Helpline on 0300 322 7012 to register for WDF or you can reach out to us on 0330 088 6686, and we can assist you with the same. It is strongly recommended that you must get professional advice on this matter.

• Collate the information to complete your disclosure;
• Compute the final tax liabilities including tax, interest and penalties;
• Complete and submit the disclosure, using the unique DRN provided when notifying.