HMRC's offshore disclosure push brings in more filings, but less revenue than expected

Ten years after HMRC launched its Worldwide Disclosure Facility for offshore income and gains, disclosure volumes have risen but the program has not delivered the revenue expected. The latest review says HMRC has collected just under £920 million to date, with more than £100 million secured in each of the past two years.

Why it matters: - The Worldwide Disclosure Facility is HMRC’s main route for people with overseas income or gains to correct their UK tax affairs voluntarily. - The size of the take matters because the facility is meant to recover unpaid tax, interest and penalties without resource-heavy investigations. - Lower-than-expected revenue suggests HMRC may not be converting its offshore data into tax receipts as efficiently as hoped.

What happened: - Amit Puri, managing director of Pure Tax Investigations, reviewed the Worldwide Disclosure Facility for the ACCA and said the WDF is not bringing in the anticipated revenue. - HMRC has secured just under £920 million from WDF disclosures to date, including tax, statutory late-payment interest and penalties. - HMRC collected more than £100 million in each of the past two years. - The number of disclosures has increased in recent years.

The details: - The WDF lets individuals with overseas income or gains make a voluntary disclosure through an HMRC portal. - If the online disclosure is full and complete, there is no need for further engagement with HMRC. - HMRC has used the WDF as part of a wider one-to-many “nudge letter” strategy. - That approach is less resource-intensive than one-to-one enquiries. - There is a correlation between the number of informal letters HMRC sends and the number of WDF disclosures received. - Fewer than 2,000 informal letters a month are being sent out, which is small compared with the millions of banking-account data lines HMRC receives each year. - WDF disclosures totaled 16,589 in 2018 and 2019. - Offshore accounts reported to HMRC in 2017 or 2018 numbered around three or four million. - The amount of data HMRC receives far exceeds the number of disclosures and the number of nudge letters sent. - The average tax secured per disclosure has not increased over time. - That has remained true even though HMRC extended the 12-year tax-assessing rule for offshore matters and offshore transfers. - Annual tax revenues from WDF disclosures have not increased.

Between the lines: - The gap between HMRC’s offshore data haul and its disclosure results suggests the current outreach model is not pulling in enough taxpayers. - Puri argues that more needs to be done, but the available figures also point to a program that may be constrained by the volume of HMRC contact, not just taxpayer behavior. - If taxpayers wait for HMRC to make first contact, they can lose the chance to make a wholly voluntary disclosure and access the minimum penalties. - The comment about HMRC being “unambitious,” “incapable” or “drowning” in banking data is analysis, not established fact.

What's next: - Taxpayers with overseas income, accounts or assets are being urged to review whether UK tax on investment income and gains has been correctly calculated and disclosed. - Advisers will continue to watch whether HMRC increases its use of nudge letters or shifts more aggressively toward one-to-one enquiries. - Future WDF results will likely hinge on how much of HMRC’s offshore data it can turn into direct contact and voluntary filings.

The bottom line: - The WDF is producing disclosures, but the revenue picture suggests HMRC still has not fully converted its offshore enforcement data into cash collected.