HMRC is currently writing to UK residents who were named in the leaked Pandora Papers and offering them the chance to regularise their tax affairs. The letters are being sent to UK residents named in the files of 14 offshore financial service providers.
During 2021 and 2022, the International Consortium of Investigative Journalists released more than 11 million records from 14 offshore service providers, this is known as the Pandora Papers. HMRC has been analysing this data, which is the largest ever release of financial documents to identify UK residents with untaxed offshore assets.
HMRC’s letters, which started distribution earlier this month, warn recipients to report all their overseas income or gains on which they owe UK tax or face penalties of up to 200% of any tax due or prosecution.
There are typically two methods for making a disclosure.
- The Contractual Disclosure Facility (CDF) is a facility for taxpayers to disclose serious tax fraud to HMRC. The CDF is only suitable for taxpayers who want to confess to tax fraud. It is not a method to notify HMRC about errors, mistakes or avoidance schemes where no fraud has taken place. HMRC will not criminally investigate and prosecute taxpayers over fraud disclosed as part of the CDF contract. This is in return for the taxpayer meeting some important conditions including making a full, open, and honest disclosure of all the tax fraud committed. If all the conditions are met, the investigation will be conducted using civil powers, with a view to a civil settlement for tax, interest and a financial penalty.
- The Worldwide Disclosure Facility (WDF) was launched in September 2016 and is open to those who want to disclose a UK tax liability that relates wholly or partly to an offshore issue. Unlike previous disclosure opportunities, the WDF does not offer any special terms for settling tax affairs and in most cases any interest and penalties levied will be charged in full. The WDF Facility does not provide any protection from prosecution and so where there is deliberate and/or fraudulent conduct, such as evasion, the CDF is the more appropriate facility.
Recipients of these letters should seek professional advice as a matter of urgency.
Source:HM Revenue & Customs| 19-06-2023