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30 August 2017

Higher penalties for offshore disclosures from September 2017

In a bid to improve global tax transparency, the new Common Reporting Standard gives HM Revenue & Customs access to information from over 100 jurisdictions.

The Common Reporting Standard is an information standard for the automatic exchange of tax and financial information on a global level, which was developed by the Organisation for Economic Co-operation and Developed (OECD) in 2014.

So far over 100 jurisdictions have signed up to this exchange of information, and this means that HMRC will now have unprecedented access to information on offshore income and assets for UK taxpayers.

Due to the significance of this new regime, ‘Requirement to Notify’ legislation has been issued, which requires tax advisers to write to any clients that might be affected by the changes by 31 August 2017, to formally notify them of what is changing, and suggesting that they disclose any offshore irregularities before HMRC find them.

Where a taxpayer wishes to voluntarily disclose offshore income or assets then they can do so using the Worldwide Disclosure Facility (WDF), which is an online tool designed to simplify the process of making a disclosure and calculating any penalties that might apply. These penalties vary depending on the category that the relevant jurisdiction comes under, with the worst case being disclosures relating to category 3 (the least transparent) jurisdictions, where penalties can be up to 200% of the tax.

The WDF has been around since September 2016 and will remain open until September 2018 but, unlike previous facilities such as the Liechtenstein Disclosure Facility, it does not offer any beneficial terms for disclosure. However, in line with most voluntary tax disclosures, penalties can be reduced where there is full co-operation and access to records, and then further reduced where a disclosure is ‘unprompted’, which can bring the penalty down to 0% in come cases.

Following the ‘Requirement to Notify’ deadline of 31 August 2017 though, and with the level of information now being made available to them, HMRC have suggested that from 1 September 2017 onwards they are unlikely to accept any new disclosures as being ‘unprompted’, since the taxpayer should have been made aware of the Common Reporting Standard and the various routes available for making a disclosure.

Those with offshore regularities are therefore best advised to make a disclosure before the end of August if they wish to benefit from the reduced penalties.

For further information on this matter please contact me.


Key Facts:

  1. The Common Reporting Standard gives HMRC access to information from over 100 jurisdictions
  2. The Worldwide Disclosure Facility remains open until September 2018
  3. HMRC have made all tax advisers formally advise their clients about the new rules
  4. As a result, reduced penalties for ‘unprompted’ disclosures won’t apply from September 2017

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