A new one-to-many compliance campaign is targeting taxpayers named in the Pandora Papers. It invites them to make use of the contractual disclosure facility (CDF) or the worldwide disclosure facility (WDF).
The Pandora Papers comprise 11m records from 14 offshore financial service providers released by the International Consortium of Investigative Journalists during 2021 and 2022.
HMRC has been using the information contained in the papers to identify UK taxpayers who may have taxable income or gains they have not declared. HMRC’s letter invites recipients to update their tax affairs and reminds them that penalties of up to 200% may be charged on the tax due on any overseas income and gains not declared.
It is important that recipients use the correct disclosure facility. The CDF is only suitable for taxpayers who want to admit to tax fraud. By entering the CDF, a taxpayer will:
- admit that their deliberate conduct has brought about a loss of tax;
- tell HMRC about all the tax losses brought about by their deliberate conduct;
- give as much detail as they can within 60 days of being offered the contract;
- provide additional details, in the form of a report, following the 60-day period which includes a statement that they have given HMRC complete and accurate details of their deliberate conduct.
In turn, HMRC will agree not to criminally investigate with a view to prosecuting them for the deliberate conduct they admit to in the CDF contract.
The WDF is available to anyone who wants to disclose a UK tax liability relating to:
- income arising from a source in a territory outside the UK;
- assets situated or held in a territory outside the UK;
- activities carried on wholly or mainly in a territory outside the UK; or
- anything having effect as if it were income, assets or activities of a kind described above.
Any eligible user of the WDF must make a full disclosure of all previously undisclosed UK tax liabilities and calculate interest and penalties based on the existing legislation. Provided the disclosure is correct and complete, and the taxpayer fully co-operates by supplying any further information requested, HMRC will not seek to impose a higher penalty except in specific circumstances.
The WDF Facility does not provide any protection from prosecution. Where there has been deliberate and/or fraudulent conduct such as evasion, the CDF is the more appropriate facility. Anyone unsure about which facility to use should seek specialist advice.
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