Worldwide Disclosure Facility: how HMRC's offshore disclosure works

If you are UK resident, HMRC taxes your worldwide income and gains. That includes interest on an overseas bank account, rent from a property abroad, dividends on foreign shares and gains on foreign assets. If some of it was never declared, the Worldwide Disclosure Facility, or WDF, is the route HMRC provides to put it right. This guide covers who needs it, how HMRC finds offshore income, how far back it can go, the process, and how penalties are worked out.

Who needs the Worldwide Disclosure Facility?

It is for disclosing UK tax that relates wholly or partly to something offshore: income from a source outside the UK, gains on assets held abroad, activities carried on outside the UK, or money connected to unpaid UK tax held in another country.

You can use it if you have since left the UK, as long as the liability relates to years when you were UK resident. Where you paid tax abroad, you can usually claim credit for it, so disclosure does not mean paying twice.

How does HMRC find out?

Information about overseas income now reaches HMRC automatically, from several directions:

• Automatic exchange of information: over 100 countries, including India, have committed to exchange financial account information under the Common Reporting Standard. HMRC lists India as a participating jurisdiction.
• Other reporting: the United States shares data under FATCA, and cryptoasset reporting rules are being phased in.
• Letters from HMRC: HMRC writes to people it holds overseas information about, sometimes asking them to confirm their tax position. If you receive one and find you do owe tax, HMRC expects you to use the WDF.

How far back does HMRC go?

For offshore matters the time limits are longer than for UK-only ones: up to 12 years for non-deliberate errors, and up to 20 years for deliberate behaviour or where you never told HMRC you had taxable income. The facility covers all tax years up to and including 2024 to 2025. Income for later years goes on your tax return, and if HMRC has already sent you a return for 2022 to 2023 onwards that is still outstanding, you complete that return rather than including the year in your disclosure.

Older years: the 2018 Requirement to Correct

Anyone with offshore non-compliance in years up to 2015/16 had to correct it by 30 September 2018. If you did not, a Failure to Correct penalty can apply to those years, and HMRC says it is now too late to make a compliant correction. For 2016/17 onwards, the normal offshore penalty rules apply instead.

The disclosure process, step by step

1. Notify HMRC that you intend to disclose, through HMRC's Digital Disclosure Service. HMRC gives you reference numbers.
2. Calculate. You must make your disclosure within 90 days of the notification acknowledgement. If your case is complex you can ask for 90 extra days, giving up to 180 in total. Interest is worked out daily from when each amount was originally due, using HMRC's late payment rates.
3. Prepare the disclosure: your behaviour for each year, the income and gains, and information about the assets.
4. Pay. Your disclosure includes an offer for the full amount of tax, interest and penalties you owe, and payment is normally due when you submit. If you cannot pay in full, speak to HMRC before submitting.
5. HMRC responds. HMRC aims to acknowledge your disclosure within 15 days of receiving it and to tell you its intended course of action within 90 days of that. It may ask for evidence before accepting it.

Most of the work happens before you notify. Gathering overseas statements and property records for several years takes time, so it is better to collect the facts first and then start the clock.

How offshore penalties work

They depend on three things: your behaviour (a reasonable mistake, carelessness, or deliberate), whether HMRC prompted you, and which category of territory the income or gain came from. UK matters fall into category 1. For offshore matters, the territories HMRC lists as category 1 or category 3 are in those categories, and any territory not listed is in category 2. The maximum penalty is 100% of the tax in category 1, 150% in category 2 and 200% in category 3.

For an unprompted disclosure of a careless error, the range is 0% to 30% in category 1, 0% to 45% in category 2 and 0% to 60% in category 3. If HMRC prompted you, the careless ranges are 15% to 30%, 22.5% to 45% and 30% to 60%. Deliberate behaviour carries much higher minimums. Where you land in the range depends on how fully you co-operate.

An example: Indian interest and rent

Priya moved to the UK in 2018 and kept her NRO fixed deposits and a flat that she lets in India. She never reported either. HMRC already receives account details from India. We would reconstruct the income for each year, claim credit for Indian tax under the UK-India treaty, calculate the UK tax, interest and any penalty, and make the disclosure.

Why disclose before HMRC contacts you?

Penalties are generally lower where you come forward voluntarily and fully, before HMRC opens an enquiry. The process is also more manageable, because you set the pace and prepare the figures first. If HMRC has already written to you, please bring the letter to us before you reply, as what you say first can affect how your case is treated.

HMRC says it will not publish the details of people who make a complete and accurate disclosure and co-operate fully. It also says that disclosing does not remove the possibility of criminal prosecution, which it reserves for cases where only a criminal sanction is appropriate.

How we help

We take care of both sides. The UK work is carried out by Metta Accountants and the India work by our partner firm, Metta Accountants India, as two separate engagements with the teams working together. See our Worldwide Disclosure Facility service and our UK-India tax service. Fees are agreed by consultation.