Worldwide Disclosure Facility (WDF) Guide for Offshore income disclosure
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The Worldwide Disclosure Facility (WDF) is a program introduced by HM Revenue & Customs (HMRC) in the UK. It allows individuals and businesses to voluntarily disclose undeclared UK tax liabilities related to offshore assets, income, or activities.
The WDF aims to provide a straightforward process for taxpayers to come forward and correct their tax affairs, while potentially reducing penalties and avoiding prosecution. By disclosing the WDF, taxpayers can take advantage of favourable terms and ensure they comply with UK tax laws.
The blog will provide a comprehensive guide on the WDF, including eligibility criteria, the disclosure process, and the potential consequences of not disclosing.
What is the Worldwide Disclosure Facility?
The Worldwide Disclosure Facility (WDF) is a program established by HM Revenue & Customs (HMRC) in the UK. It allows individuals and businesses to voluntarily disclose any undeclared tax liabilities related to offshore income and assets. The WDF aims to encourage taxpayers to come forward and correct their tax affairs without facing severe penalties.
Through the WDF, taxpayers can report income from foreign bank accounts, investments, and properties that have not been declared. By making a disclosure, individuals can benefit from reduced penalties and avoid criminal prosecution for tax evasion.
The facility is designed for those who want to ensure compliance with UK tax laws and resolve any outstanding tax issues. It is important to act quickly, as the WDF is available for a limited time, making it essential for eligible taxpayers to take advantage of this opportunity to correct their tax records.
What all things are included in the WDF form?
When completing the Worldwide Disclosure Facility (WDF) form, it is essential to include specific information to ensure accuracy and compliance. Here are the key components:
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Personal information: Provide your full name, address, National Insurance number, and contact details to identify yourself as the taxpayer.
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Tax residency status: Indicate your current tax residency status in the UK or if you have been a resident in the past.
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Details of undeclared income: Clearly outline any offshore income that has not been reported. This includes wages, dividends, interest, and rental income.
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Information on offshore assets: List all offshore assets, such as bank accounts, investments, and properties, along with their values.
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Tax years involved: Specify the tax years for which you are making a disclosure. Typically, this includes the last four open tax years.
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Calculation of tax owed: Provide an accurate calculation of the total tax liability, including any penalties applicable.
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Declaration statement: Sign and date the form to confirm that the information provided is true and complete.
Including all these elements will help ensure a successful disclosure through the WDF.
Purpose of the Worldwide Disclosure Facility
The primary purpose of the Worldwide Disclosure Facility (WDF) is to encourage individuals and businesses to voluntarily disclose any unpaid taxes related to offshore income or assets. Many people may not realise they have tax obligations for overseas holdings, and the WDF provides a chance to correct this. By coming forward, taxpayers can ensure they are compliant with UK tax laws and avoid more severe penalties that could arise from non-disclosure.
The WDF also aims to promote transparency and fairness in the tax system. It helps the government identify and address tax evasion, ensuring everyone pays their fair share. By providing a clear disclosure process, the WDF supports taxpayers in rectifying their tax affairs without fearing harsh penalties.
Additionally, the WDF offers reduced penalties for those who voluntarily disclose their tax issues, making it a more attractive option than waiting for HMRC to discover discrepancies. Overall, the WDF is a vital tool for taxpayers looking to resolve their offshore tax matters responsibly.
Eligibility for the Worldwide Disclosure Facility
To participate in the Worldwide Disclosure Facility (WDF), taxpayers must meet specific criteria:
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Tax residency: You must be a tax resident in the UK or have been a resident at some point.
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Offshore income or assets: The WDF is for those with undeclared income or assets outside the UK. This includes bank accounts, investments, or properties held abroad.
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Voluntary disclosure: You must be willing to disclose your tax liabilities voluntarily. The WDF is not for those already under investigation by HMRC.
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Timeframe: The disclosure must relate to tax years still open for assessment. Generally, this includes the last four tax years.
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Full disclosure: You must provide complete and accurate information about your offshore income and assets. Incomplete disclosures may result in penalties.
You can use the WDF to resolve any outstanding tax issues and avoid more severe penalties by meeting these eligibility requirements.
Benefits of making a Worldwide Disclosure Facility disclosure
Making a disclosure through the Worldwide Disclosure Facility (WDF) offers several advantages:
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Reduced penalties: One of the main benefits is the potential for lower penalties compared to what you might face if HMRC discovers the undeclared income or assets first.
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Avoiding criminal prosecution: Voluntarily disclosing your tax liabilities can help you avoid criminal charges related to tax evasion, providing peace of mind.
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Clearer tax position: By coming forward, you can clarify your tax situation, ensure compliance with UK tax laws, and prevent future issues.
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Flexible payment options: The WDF allows flexible payment arrangements, making it easier to settle any outstanding tax liabilities.
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Protection from future investigations: Once you make a disclosure, you may be less likely to face future investigations regarding the same offshore income or assets.
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Support and guidance: The WDF process provides access to resources and guidance from HMRC, helping you understand your obligations and responsibilities.
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Rebuilding trust with HMRC: By being proactive, you can rebuild your relationship with HMRC, demonstrating your commitment to complying with tax regulations.
These benefits make the WDF an attractive option for those with undeclared offshore income or assets.
The Worldwide Disclosure Facility process
The process of making a disclosure through the Worldwide Disclosure Facility (WDF) involves several key steps:
Registration process
Registering for the Worldwide Disclosure Facility (WDF) is essential. Here’s how to do it:
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Visit the HMRC website: First, go to the official HMRC website, where the WDF information is located.
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Create an account: If you do not already have an HMRC online account, you must create one. This involves providing personal information such as your name, address, and National Insurance number.
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Provide tax residency details: Indicate your tax residency status. You must confirm that you are a UK tax resident or have been one in the past.
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Complete the registration form: Fill out the registration form with accurate details. This includes information about your offshore income and assets.
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Receive a unique reference number: You will receive a unique reference number after submitting your registration. Keep this number safe, as you will need it for your disclosure.
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Check your registration status: You can log into your HMRC account to verify your registration status and ensure everything is in order before proceeding with your disclosure.
Completing the registration process correctly is important for moving forward with your WDF disclosure.
Disclosure process
Making a disclosure through the Worldwide Disclosure Facility (WDF) involves several important steps:
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Gather information: Collect all relevant financial documents related to your undeclared offshore income or assets. This includes bank statements, investment records, and property details.
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Identify tax years: Determine which tax years you need to disclose. Generally, this includes the last four open tax years.
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Calculate tax owed: Accurately calculate the total tax owed on the undeclared income or gains. This will help you understand your financial obligations.
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Complete the disclosure form: Fill out the WDF disclosure form on the HMRC website. Provide detailed information about your offshore income, assets, and the tax years involved.
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Submit the disclosure: After completing the form, submit it through your HMRC online account. Ensure all information is accurate to avoid delays or complications.
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Keep records: After submission, retain copies of all documents and the confirmation of your disclosure for your records.
Following these steps carefully will help ensure a successful disclosure process under the WDF.
Payment process
After making a disclosure through the Worldwide Disclosure Facility (WDF), you must settle any tax liabilities. Here’s how to handle the payment process:
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Review the tax calculation: After submitting your disclosure, HMRC will provide you with a calculation of the total tax owed, including any penalties.
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Understand payment options: HMRC offers various payment methods. You can pay online, via bank transfer, or by cheque. Choose the method that works best for you.
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Make the payment promptly: It’s important to pay the total amount due as soon as possible to avoid additional penalties or interest charges
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Keep payment records: Save any receipts or confirmation emails related to your payment. These documents serve as proof of payment in case of future inquiries.
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Check your account: After making the payment, log into your HMRC account to confirm that the payment has been processed and your tax affairs are settled.
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Plan for future payments: Stay compliant with future tax obligations to avoid similar issues in the future.
Following these steps will help you complete the payment process effectively.
Penalties and consequences
Understanding the penalties and consequences of the Worldwide Disclosure Facility (WDF) is important. Here are the key points:
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Failure to disclose: If you do not disclose your offshore income or assets, you may face significant penalties. HMRC can impose fines based on the amount of tax owed.
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Requirement to correct (RTC): Under the RTC legislation, you must correct past tax errors. Failing to do so can lead to higher penalties, reaching up to 200% of the tax owed.
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Failure to correct (FTC) penalties: If you do not correct your tax affairs after being informed by HMRC, you may face FTC penalties. These can be severe, including potential criminal charges.
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Interest charges: Besides penalties, HMRC may charge interest on any unpaid tax. This can increase the total amount you owe over time.
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Reputational damage: Non-disclosure can lead to reputational harm, affecting your personal and business relationships.
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Increased scrutiny: Once HMRC identifies non-compliance, you may face increased scrutiny in future tax matters.
Being aware of these penalties can motivate individuals to come forward and make a disclosure through the WDF.
Preparing for a Worldwide Disclosure Facility
Preparation is key to making a successful disclosure through the Worldwide Disclosure Facility (WDF). Here are the essential steps to take:
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Review your financial records: Gather all relevant documents related to your offshore income and assets. This includes bank statements, investment records, and property deeds.
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Identify undeclared income: Determine which income or gains have not been reported to HMRC. This may involve reviewing multiple tax years, typically the last four years.
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Calculate tax liabilities: Accurately calculate the total tax owed on the undeclared income. This will help you understand your financial obligations and prepare for payment.
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Seek professional advice: Consider consulting a tax professional or accountant specialising in tax disclosures. They can provide guidance and ensure that your disclosure is accurate.
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Prepare documentation: Organise all necessary documents and information for your disclosure. This will make the submission process smoother.
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Familiarise yourself with the WDF process: Understand the steps involved in disclosing, including registration, submission, and payment.
These steps will help you feel confident and ready to make your WDF disclosure.
The Worldwide Disclosure Facility (WDF) provides a valuable opportunity for individuals and businesses to correct their tax affairs related to offshore income and assets. By making a voluntary disclosure, taxpayers can benefit from reduced penalties, avoid criminal prosecution, and ensure compliance with UK tax laws.
The WDF process involves registration, disclosure, and payment. It's important to prepare thoroughly by reviewing financial records, calculating tax liabilities, and seeking professional advice. Failure to disclose can result in severe penalties, interest charges, and potential criminal consequences.
If you have undeclared offshore income or assets, consider utilising the WDF to resolve your tax matters. You can avoid further complications and rebuild trust with HMRC by taking proactive steps. Remember, the WDF is limited, so it's best to act promptly if you qualify.
If you need assistance with tax disclosures, our team of tax experts can guide you through the complexities of tax investigations and disclosures and ensure you comply with all regulations.
Don't wait until it's too late. Contact us today at 0333 2422 572, email dnstax@dnsaccountants.co.uk, or book a free consultation. Our friendly experts will be happy to discuss your specific requirements and provide tailored solutions to protect your business and ensure you pay the right amount of tax.
Siddharth Agarwal
I am a Chartered Tax Advisor (OMB) and ACCA. I have 9+ years of experience in owner-managed business taxation issues, company reorganisations, property taxation, and succession planning.
I also work with private clients on bespoke tax planning strategies for trusts, residence status, and non-residents.
I aim to fulfil my professional duties towards my clients and keep them satisfied, my utmost priority. I believe in establishing and maintaining businesses and personal relationships as the key to mutual growth.