In date or out of date, that is the question

    There has been a marked increase in the number of calls we are receiving seeking advice surrounding the Worldwide Disclosure Facility (WDF). The first question asked invariably goes along the lines of ‘We have a new client who needs to make a disclosure. How many years do we need to go back?’.

    Rule of thumb

    Of course each case is judged on its own facts, but many of our clients have been following the four, six and 20 year rule of thumb based on the behavioural assessing time limits. It is rare for a discussion to take place which debates the possibility of a disclosure restricted to four years, following a potential failure to take reasonable care. 

    The majority of the conversations inevitably focus on whether the end client has carelessly or deliberately failed to disclose their offshore income. Once the end client’s behaviour has been tested and established, disclosures have been made on that basis and have been accepted without challenge.

    Change of approach? 

    However, both our accountancy clients and ourselves have noticed a change of approach from HMRC of late, with a stricter application of Section 36 TMA 1970 and a tax loss attributable to a failure to notify.

    In other words, if an end client has received tax returns but not declared offshore income, the number of years to disclose is driven solely by behaviour. But if the tax loss is down to a failure to comply with an obligation under Section 7 TMA 1970, up to 20 years are in play to disclose, depending on how long the undeclared offshore income has been received for and in the absence of a reasonable excuse for the lack of notification.

    This was one of the issues we raised with Geoff Lewis, Assistant Director for Fraud Investigation Service from HMRC, when he visited our offices earlier this month to discuss all things WDF. Geoff recently delivered a live webinar for HMRC introducing the Worldwide Disclosure Facility, the offshore penalty regime and the Requirement to Correct.

    He stressed there had been no change in approach and stated unequivocally that HMRC acts in accordance with statute and pursues tax on that basis. He went on to say that the only benefit to disclosing via the WDF is that HMRC will not name and shame the end client. 

    The meeting broadened out into the merits of the Contractual Disclosure Facility (CDF) option compared to the WDF route.

    Geoff said the CDF was the way to go if it was felt the end client was at risk of a criminal prosecution. Naturally we asked if HMRC is actively looking to prosecute some offshore evaders to set an example and respond to criticism levelled by some MPs, but all he was prepared to say was that the criminal prosecutions team has a rolling caseload of 100 cases at any one time and it was ultimately a decision for the Crown Prosecution Service to prosecute.

    To discuss any of the points raised in this article concerning the WDF, please contact the author of this article, our Head of Technical Research Guy Smith.