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HMRC campaigns – do you have income and gains from overseas?
14/09/2016, by Low Incomes Tax Reform Group, Tax Articles - Income Tax
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HMRC launch a new Worldwide Disclosure Facility encouraging taxpayers to put things right if they have not declared all of their UK tax liabilities relating to offshore income or gains.

This LITRG article outlines the new opportunity to tell HM Revenue and Customs (HMRC) about any problem with your tax.

Worldwide income

If you have income and gains that arise outside the UK, you generally have to tell HMRC about them, as you may have to pay UK tax on them. If you have worldwide income that you have not declared to HMRC, then HMRC’s Worldwide Disclosure Facility offers an opportunity to bring your tax affairs up to date.

If you think you might be in this position, LITRG suggests that you seek professional advice before making use of the Worldwide Disclosure Facility, particularly if you deliberately did not declare taxable income to HMRC. If you are on a low income, you may be able to seek assistance from one of the tax charities.

If you have worldwide income and gains that you should have told HMRC about, it is important that you take steps to bring your affairs up to date, as HMRC are now able to benefit from new international information-sharing arrangements. In addition, the UK is intending to introduce new laws, which will take effect in 2018 – these laws will impose tougher penalties in respect of undeclared offshore income and gains.

Who and what does the Worldwide Disclosure Facility apply to?

The Worldwide Disclosure Facility is available to anyone who is disclosing a UK tax liability that relates wholly or in part to an offshore issue, including:

•    income arising from a source outside the UK
•    assets situated or held outside the UK
•    activities carried on wholly or mainly outside the UK
•    where the funds connected to unpaid tax are transferred outside the UK.

How do I use the Worldwide Disclosure Facility?

You are able to make a disclosure using the online Digital Disclosure Service; first, you need to notify your intention to disclose.

Notify HMRC – you need to tell HMRC that you will be making a disclosure. HMRC will give you a unique disclosure reference number.

Make your disclosure – once you have notified an intention to make a disclosure, you will have 90 days to:

  • gather together the information you need to complete your disclosure
  • calculate the final liabilities including tax, duty, interest and penalties
  • complete the disclosure, using the unique disclosure reference number provided when notifying.

The process of calculating your liabilities and completing your disclosure can be very complex. You will also need to consider the level of penalties that apply, which depend on your behaviour.

Are there any terms or conditions for using the Worldwide Disclosure Facility?

The terms of the facility include that:

  • you must be eligible – that is, you have an undisclosed liability that relates wholly or partly to an offshore issue, such as income from an overseas bank account or a foreign pension
  • you must make a full disclosure of all previously undisclosed UK tax liabilities
  • you must calculate interest and penalties based on the existing tax legislation.

You should be aware that there are no special terms, such as lower penalties, for using the Worldwide Disclosure Facility. In addition, the facility does not offer immunity from criminal investigation or prosecution, although HMRC will generally reserve this for situations when the disclosure is incomplete or inaccurate, or if you refuse to send in additional information that they request.

In order to make a disclosure, you have to self-assess your behaviour, to work out your penalty and the number of years covered by the disclosure.

Although you can only use the Worldwide Disclosure Facility if you are disclosing an offshore issue, if you also need to disclose onshore (UK source) issues, you must do that in your disclosure too.

Note

If you are not resident in the UK for tax purposes, you do not normally have to pay UK tax on your offshore income and gains. You should check your tax residence status. If you are not domiciled in the UK, special rules apply, which may mean this does not apply to you.

There is more information on how to come forward and make a voluntary disclosure under this campaign on GOV.UK. If you are not sure whether or not the Worldwide Disclosure Facility applies to you, you can contact HMRC on the Helpline on 0300 322 7012.

Useful links

HMRC Worldwide Disclosure Facility
HMRC Digital Disclosure Service  
Tax charities

About The Author

The Low Incomes Tax Reform Group (LITRG) is an initiative of the Chartered Institute of Taxation to give a voice to those who cannot afford to pay for tax advice. LITRG comprises tax specialists from professional practice and the voluntary sector, from publishing and from HM Revenue & Customs, together with people from a welfare benefits and social policy background. Visit www.litrg.org.uk for further information.
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