The success of HMRC’s non-compliance measure, known as the Requirement to Correct policy, and the importance of the Worldwide Disclosure Facility (WDF) has been highlighted in new research.
Compiled by Saffery Champness, the research shows a total of 15,403 disclosures have been made as of the end of the 2018/19 financial year, with 7,632 (49%) being made after the 30 September 2018 deadline.
A Failure to Correct policy, that came into force in October 2018 and can see penalties of up to 200% of the tax liable, seems to have prompted a rush from taxpayers to ensure they are fully compliant with the policy.
A total of 18,364 notifications of intention to disclose were received between December 2016 and September 2018, with over half (10,284) being received in September 2018.
Zena Hanks, partner in the private wealth team at Saffery Champness, said: “With its Requirement to Correct campaign having ended, HMRC have firmly moved from using the carrot to encourage compliance, to using the stick to enforce it.
“Clearly, though, this data underlines the fact that many people’s tax affairs still need to be brought up to date in line with current compliance regulations, which likely reflects an increasingly complex tax system, particularly where non-UK assets, income or gains are involved.”
Despite the September 2018 deadline passing, the WDF will remain open after 1,734 notifications of intent were received by HMRC in the six months up to April 30 2019, with the hope of collecting as much tax as possible.
Hanks says that late payees shouldn’t necessarily be punished due to the complexity of international issues, saying: “The nature of these international issues, for the unadvised, can make matters unnecessarily complicated and there is a risk that any income is either not reported, or is reported incorrectly – often due to simple misunderstanding or error.
“HMRC are therefore arguably correct in their approach to keep the Worldwide Disclosure Facility, and other disclosure campaigns, running to allow taxpayers to come clean.
“Disclosures that have been or are being submitted after the RTC deadline my well face larger penalties in the event of offshore income being involved now that the Failure to Correct policy is in full swing.
“But this doesn’t seem to be putting off taxpayers who, rightly, want to ensure they are getting things right first and foremost and who may still receive a pat on the back from HMRC for doing so in the form of reduced penalties for voluntary disclosures.”
The government has introduced over 100 new measures to tackle non-compliance since 2010, bringing in more than £2.9bn. HMRC forecasts a further £2.1bn could be raised through tackling non-compliance by 2023-24 following measures introduced in the 2018 Budget.