Worldwide Disclosure Facility: A Complete UK Guide

The Worldwide Disclosure Facility (WDF) is HMRC's disclosure facility for individuals and businesses with undeclared offshore income, gains, or assets. It allows taxpayers to regularise their tax affairs on more favourable terms than if HMRC discovers the non-compliance independently. The WDF is a key part of HMRC's strategy to tackle offshore tax evasion, supported by the Common Reporting Standard and automatic exchange of information agreements.

Who Can Use the WDF

The WDF is open to anyone who has undeclared tax liabilities arising from offshore income, gains, or assets, including bank accounts, investment portfolios, property, trusts, and business interests held overseas. It covers all UK taxes, including income tax, capital gains tax, inheritance tax, and corporation tax.

You cannot use the WDF if HMRC has already opened a compliance check or criminal investigation into your affairs, or if HMRC has already issued an information notice relating to the undeclared liabilities. The facility is designed for unprompted disclosures where HMRC has not yet identified the non-compliance.

The Disclosure Process

The WDF process has several stages. First, you notify HMRC of your intention to make a disclosure using the online service. This triggers a 90-day disclosure period during which you must prepare and submit your full disclosure. The disclosure must include details of all undeclared income, gains, and assets, together with calculations of the tax, interest, and penalties due.

You must provide a certificate of tax liability and a detailed explanation of why the non-compliance occurred. If the non-compliance was deliberate, you will need to explain why and provide evidence of the corrective steps you have taken. The disclosure must be signed by you and, where applicable, by your tax adviser.

Penalty Ranges

WDF penalties vary depending on the behaviour that led to the non-compliance and the quality of the disclosure. For non-deliberate (careless) behaviour, the penalty range is 0% to 30% of the tax due. For deliberate but not concealed behaviour, it is 20% to 70%. For deliberate and concealed behaviour, it is 50% to 100%.

Offshore penalties can be substantially higher under the strict liability offshore penalty regime. For category 1 territories (those without a DTA or information-sharing agreement with the UK), the penalty range starts at 100% and can reach 200% of the tax due for deliberate and concealed behaviour. For category 2 territories (those with information-sharing agreements), the range is 80% to 180%. For category 3 territories (the UK and other EEA countries), the standard penalty ranges apply.

Failure to Correct and Requirement to Correct

The failure to correct (FTC) regime was introduced in the Finance Act 2019 to penalise individuals who had offshore non-compliance and failed to correct it by 30 September 2018 (the requirement to correct deadline). The FTC penalty can be up to 200% of the tax due, with no cap.

The requirement to correct (RTC) was a legal obligation for anyone with undeclared offshore liabilities to correct their position by the deadline. If you failed to do so, you became liable to FTC penalties and HMRC could publish your details on its list of deliberate defaulters. The RTC deadline has long since passed, but the consequences of failing to correct remain relevant for anyone who has not yet come forward.

Criminal Investigation Risk

One of the key benefits of using the WDF is that it reduces the risk of criminal prosecution. HMRC has stated that it will not normally carry out a criminal investigation where a full and unprompted disclosure is made under the WDF. However, this assurance does not apply in cases involving fraud, organised crime, or money laundering.

If HMRC considers that the non-compliance was particularly serious or involved an offshore evasion structure designed to conceal the true ownership of assets, it may still pursue a criminal investigation even after a WDF disclosure. The Contractual Disclosure Facility (COP9) is the appropriate route for cases where there is a risk of criminal prosecution, as it offers immunity from prosecution for the tax offences covered by the disclosure.

Practical Considerations

Before making a WDF disclosure, gather all relevant records for the full period of non-compliance. This includes bank statements, investment reports, property valuations, and any correspondence with offshore financial institutions. You will need to calculate the tax, interest, and penalties accurately, as HMRC will check your calculations.

Professional advice is strongly recommended. A tax adviser can help you prepare the disclosure, negotiate with HMRC, and ensure that you are using the correct facility for your circumstances. The WDF can still be a cost-effective way to resolve offshore non-compliance if you act promptly.

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