Disclosures under the Worldwide Disclosure Facility

The Worldwide Disclosure Facility can be used to disclose unpaid tax that relates to offshore income or gains. It is designed to be used by taxpayers who have not previously reported such income or gains, either in whole or in part.

Individuals should be aware that under the Common Reporting Standard, many countries share tax and financial data with HMRC (the UK tax authorities).  This means that HMRC is able to identify UK resident individuals who may have received taxable foreign income and gains.  Individuals identified in this way, and who have not wholly reported the income or gains, but should have done so, may be contacted by HMRC.


Under the Requirement to Correct (‘RTC’) legislation, individuals were given until 30 September 2018 to disclose to HM Revenue & Customs any unreported foreign income or gains for tax years up to 5 April 2016. As this deadline has now passed, taxpayers now fall into the Failure to Correct (‘FTC’) regime. Note that the FTC regime only applies for unpaid taxes from years up to, and including, 2015/16. A different regime operates for unpaid taxes on overseas income/gains that were generated after 5 April 2016. Both are discussed here.

Taxpayers who have claimed the remittance basis, and have not brought the relevant foreign income to the UK, have no cause for concern.

Types of income and gains to be disclosed under the WDF

The legislation applies to income tax, capital gains tax, and inheritance tax, where the unpaid tax relates to:

  • income from a non-UK source, or
  • assets situated outside the UK, or
  • an activity carried on outside the UK

There may be a variety of reason that tax was unpaid. For example, it may relate to errors in a return (e.g. not declaring foreign income, or under-declaring it), or as result of failing to notify HMRC of their requirement to complete a return.

Types of under-declared income/gains that are frequently seen are:

  • rental income from an overseas property
  • selling an overseas property at a gain
  • income from an overseas trust
  • bank interest from an overseas account
  • overseas dividends

It may be that tax has been paid to a foreign jurisdiction. If so, double taxation relief may be possible, and the Tax Treaty between the UK and the foreign jurisdiction should be reviewed.

Time Limits

The number of tax years that an individual is required to correct depends on the reason for the failure to disclose the income/gains.

  • For ‘innocent’ errors, 4 prior tax years are required
  • For ‘careless behaviour’, 6 prior tax years are required
  • For ‘deliberate’ behaviour, 20 prior tax years are required

Time limits were frozen at 5 April 2017, which means that for innocent errors HMRC can go back to 2013/14 onward. For ‘careless behaviour’ HMRC can go back to 2011/12 onwards. For deliberate error HMRC can go back to 1997/98 onwards.


Penalties under the FTC regime apply to tax years up to and including 2015/16. They are as follows:

  • The standard penalty is 200% of the tax due. This can be reduced to a minimum of 100% of the tax due. Though where the taxpayer has made a prompted disclosure (i.e. where HMRC has approached the individual first), the penalty will not be less than 150%.
  • HMRC can also charge a penalty of 10% of the value of the asset to which the non-compliance relates. This may arise where the amount of tax relating to the overseas asset exceeds £25,000 in a single tax year

For tax year 2016/17, and future tax years, the FTC penalty regime does not apply. Instead, penalties are calculated on the basis of the following three variables. (1) the country in which the foreign asset was held (for territory categorisation, see here); (2) the reason for the taxpayer’s non-compliance; (3) whether their disclosure has been prompted by the taxpayer or not. For further details, see the HMRC pdf ‘Penalties for offshore non-compliance’.

Reasonable Excuse

Penalties may not be charged if a taxpayer had a reasonable excuse. However, there will be few situations where it would be accepted by HMRC that there was a reasonable excuse. If the non-compliance came as a result of relying on professional advice this could be constitute reasonable excuse. However, if the advice was provided by someone without sufficient expertise, or was taken from advice given to another person, or was linked to the investment arrangement associated with the offshore income/gain in question, it will generally not be held to be a reasonable excuse. Furthermore, reliance on someone else (e.g. a tax advisor) to make the appropriate tax reporting is only a reasonable excuse if the individual took care to ensure that the appropriate tax reporting was made.

How to Make a Disclosure

A taxpayer or their agent can register with HMRC that a disclosure is needed online, here. By default, 90 days are given in order to make the disclosure, and it can normally be completed online. In the disclosure the taxpayer, or their agent, will indicate how much unreported income and gains were received each year, and the amount of additional tax that they owe, as well as compute the penalties that they owe.

The online disclosure will then generate an ‘Offer Letter’. On this letter, the total amount of tax and penalties will be shown. This payment should be made on the same day that the Offer Letter is submitted to HMRC.

While it is possible for the individual to complete the disclosure themselves, the complexity of adequately reporting and calculating the correct amount of tax means that it’s often best to use a tax specialist who is knowledgeable in the area. This is because there is a risk that the Offer Letter will not have the correct amount of tax and penalties calculated based on the income/gains received, and the tax band(s) that the individual falls into.

HMRC will acknowledge receipt of the Offer within 15 days. Then, within 90 days of the acknowledgement, HMRC will write to either accept the offer (thereby closing the matter), or else request further information, such as evidence to confirm the amount of income/gains received.


John spent many years living and working in Ireland. He moved back to the UK in tax year 2013/14, but kept a bank account in Ireland open, which generated £3,000 interest income per year.

Realising that the bank interest should be reported on his UK return, John discloses it on his 2019/20 tax return. Because it is before 31 January 2021, he can also use the standard one year amendment window to amend his 2018/19 tax return.

For the years prior to that, the disclosure is made using HMRC’s online disclosure service.

As John was a higher rate taxpayer for all these years, a 40% tax rate applies.

John determines that his fits HMRC’s definition of being careless. Therefore, the penalties are calculated as follows:

Tax YearTaxPenalty RatePenaltyTotal
2013/14£1,200100% [Note 1]£1,200£2,400
2016/17£1,2000% [Note 2]Nil£1,200

Note 1: FTC penalty 100% for years prior to 2016/17 on basis of it being an unprompted disclosure.

Note 2: non-FTC penalty for Category 1 country. 0 – 30% for years from 2016/17. He seeks to pay the 0%, subject to HMRC’s agreement.

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