Do I need to make a worldwide disclosure?
If you receive a nudge letter (which starts as `Your overseas assets, income or gains`) from HMRC and after having checked your tax affairs you find that you need to make a WDF disclosure, you can follow this step by step guide.
`Prevention is better than cure` – It is wise not to wait for HMRC to find out about your worldwide income and send you a `nudge` letter. If you realise that you have undeclared foreign income or gains, immediately contact your tax adviser and get it sorted. Voluntary disclosures attract lower penalty rates.
Step 1 – Where possible, contact HMRC on the telephone number given on the nudge letter. They will give you more information about the foreign income in question, which will help focus the review of tax affairs and help in filing an accurate disclosure.
Step 2 – Send the certificate back to HMRC after ticking box 1.
Please note this is an important step because if the statement turns out to be false this could expose the tax payer to criminal investigation and prosecution.
What actions do I need to take after sending the worldwide disclosure certificate back to HMRC ?
Step 3 – Register for the Digital Disclosure Service (DDS) on Worldwide disclosure webpage of gov.uk.
Please note 90 day time period starts from the date you notify HMRC using DDS not from the date you sent the certificate back mentioned in Step 2.
Step 4 – You have now 90 days to:
- Gather all information to complete the disclosure.
- Calculate the total tax bill including tax, duty, interest and penalties on a year by year basis.
- Fill in the disclosure, using the unique disclosure reference number (DRN) given on WDF notification.
- Gather information on maximum value of overseas assets you had in the last 5 years.
IMPORTANT: Worldwide disclosure should be full and frank .
What help is available to calculate income and gains ?
I have written a number of blogs on this topic, which you may find useful.
- WDF – Taxation of Interest Income from NRE / FCNR Deposits.
- WDF : Taxation of LIC Policy in UK.
- WDF : Foreign gains via non-resident company
- WDF : Foreign capital losses
- WDF : TDS on NRO Deposits in India
- WDF : Indian provident fund and UK taxation
- WDF : Indian Mutual funds and UK taxation
- WDF : Computation of Double taxation relief
- WDF: Compulsory land purchase in India
- WDF: Foreign income less than £2k
- WDF : Foreign agriculture income
- HMRC has launched a toolkit for foreign income on 6th December 2022. I have read through it, it’s fairly comprehensive. A simple video on Youtube also jogs client’s memories.
- Be aware of the effect of Double Taxation Agreements for this DTAA Digest and HS 263 will come handy.
How many years are covered by worldwide disclosure ?
Taxpayer will also need to self-assess their own behaviour. Based on this assessment, tax payer will be presented with the number of years for which disclosure needs to be made.
| 12 years | Non-deliberate (see below) |
| up to 20 | Dishonest behaviour |
Time period for offshore assessments was changed in 2019. This overrides RTC Regulations. Earliest year, if reasonable care taken, is 2015/16. If behaviour was careless earliest year is 2013/14. Incase of failure to notify last 20 years need to be included. These time periods changed on 6th April 2021.
This will also have an effect on the quantum of penalty.
What penalties are charged under worldwide disclosure regime?
Details of penalty calculation is given in HMRC guidance CC/FS17
India is not on the list thus falls in the residual category 2.
See Example of Offshore Penalty Calculation
Is there scope of Penalty suspension?
Penalty suspension – Penalty for the year 2016-17 and later years can be requested to be suspended refer to David Testa v Revenue & Customs [2013]
on the BAILII Website. BAILII is a small charity making case law freely available.
HMRC’s WDF team can consider penalty suspension in case of full co-operation is provided to HMRC.
When does the tax bill needs to be paid?
You must make full payment in accordance with the disclosure on the same date that the disclosure is submitted, unless a payment plan is needed.
Current rate of interest for late payment of tax is 6.75% since 13th April 2023 [this set at Bank of England base rate plus 2.5%] – source
Please note in case of Time to pay arrangements. Interest on penalties usually start 30 days after the issue of Notice of determination by officer of HMRC. For example a penalty is decided for the year ended April 2015 on 31st March 2023. Interest on penalty will start from 30th April 2023 see TMA 1970 Sec 103A
You will get an acknowledgement from HMRC within 15 days of them getting the completed disclosure. They will aim to tell us of the intended course of action within 90 days of the acknowledgement.
Which exchange rate to be used ?
HMRC has provided helpful guidance on RDRM31190.
As per HMRC guidance, if threshold is breached and you need to include the income in the tax return, exchange rate that needs to be used is of the day that the income arose overseas. In practice it may not be reasonable to calculate in this way, in those cases average rates can be used. See foreign notes SA106.
Do I need an accountant?
Worldwide disclosure involves looking at different income/gains over a number of years. Tax rules are complex and handling HMRC enquiry can be a stressful experience. It is advisable to engage a qualified accountant. I have listed a few reasons for hiring a qualified accountant in our blog – Do i need an accountant ?
Further resources to help you on your worldwide journey:
HMRC Guidance on worldwide disclosure facility
ICAEW page for current and historic exchange rates
Roy Accountants 