Pandora Papers – HMRC Compliance Activity (April 2024)
In June 2023 HMRC commenced their compliance response to the Pandora Papers by issuing letters to some taxpayers who are named in the papers and asking them to review their tax affairs and check they are up to date. The Pandora Papers was the largest release of offshore data by the International Consortium of Investigative Journalists (ICIJ), which involved 11.9 million leaked documents that were published starting in October 2021. The release contained documents from 14 offshore financial service companies.
Following continued risking of the Pandora Papers data a further tranche of letters will be issued by HMRC to some Wealthy individuals from the week commencing 8 April 2024 which will include an extended response period of 60 days.
HMRC are writing to people they suspect may have additional tax liabilities to disclose. The letters will identify which overseas entity or entities HMRC believe that the person is connected to from the information in the Pandora Papers. The letters are being copied to agents where HMRC are aware that the taxpayer is represented by an agent and the appropriate authorisation is in place.
A dedicated team has been set up by HMRC to handle queries and a telephone number is provided on the letter. The call handlers will be able to assist taxpayers and agents in identifying what the letter relates to.
Copies of the different letters that will be sent are provided below. There are three versions of the letter for recipients who are UK resident and UK domicile, those who are UK resident and are UK deemed domiciled (by virtue of Condition A or B), and those who are UK resident but non UK domicile.
The letters explain that penalties of up to 200% of any tax that is found to be due may be charged. They recommends getting professional advice if the taxpayer is not sure what they need to do to correct their UK tax position. They explain that the taxpayer need take no action if they believe their tax affairs are correct and up to date.
The CIOT has produced guidance for members assisting clients who may have additional tax liabilities to disclose to HMRC – see here. It explains the different processes through which taxpayers can make disclosures and explains that members should choose the disclosure service which is most appropriate for their client’s circumstances given all the issues to be corrected and the reason(s) why the inaccuracy(ies) occurred.
Where deliberate behaviour or fraud is suspected the Contractual Disclosure Facility (CDF) should be used. This is because making a disclosure to HMRC under the CDF / Code of Practice 9 (COP9) route can give the taxpayer protection from criminal prosecution for tax offences so long as they make a complete, open and honest disclosure of all deliberate behaviour and HMRC accepts them into COP9. That protection is not formally available via any other disclosure method. For disclosures of non-deliberate offshore non-compliance another method such as the Worldwide Disclosure Facility (WDF) could be used.
Making disclosures to HMRC, particularly of tax fraud and deliberate behaviour, is a specialist area so we would recommend that anyone who considers that they might need to make a disclosure to HMRC should first seek advice from a suitably qualified and experienced tax professional. Our Find a Member service can be used to help locate a CIOT member by specialism.
A CIOT member must comply with the fundamental principle of professional competence and due care as set out in Professional Conduct in Relation to Taxation (PCRT). This means that they should not undertake professional work which they are not competent to perform unless they obtain appropriate assistance from a suitably qualified specialist. Advice from another adviser specialising in tax disputes may therefore be needed if the member does not have the necessary expertise to handle a disclosure or investigation themselves.