Isle of Man (Manx) Disclosure Facility
The success of the Liechtenstein Disclosure Facility (LDF) prompted HMRC, to reach another agreement with another foreign jurisdiction – albeit one closer to home. The Manx Disclosure Facility ran from 6 April 2013 to 31 December 2015 and has now been replaced by the Worldwide Disclosure Facility (WDF).
In today’s climate, there is little distinction between tax evasion and money laundering. So, an opportunity is being offered enabling those with untaxed funds to come clean, and to make an unprompted voluntary disclosure.
If you are contemplating making a voluntary tax disclosure, or would like assistance with any other tax problem, contact an inTAX specialist now, for a free, no-obligation consultation.
How We Can Help
inTAX has extensive experience of all the disclosure facilities that have been offered to date, including the Offshore Disclosure Facility (ODF), the New Disclosure Opportunity (NDO), the Tax Health Plan (THP), the LDF, plus all other types of tax enquiries, both criminal tax investigations and civil tax investigations.
Who can participate?
The MDF is open to anyone, including individuals, partnerships, companies, trusts, foundations and other similar entities who has been resident in the UK for tax purposes.
Firstly, you need to have an asset in the Isle of Man. This can be, for example a bank account, an annuity contract, a company, partnership, foundation, establishment, trust or other fiduciary entity. Secondly, you must not be or have been subject to a tax investigation. In contrast, participation in the LDF is allowed even if a tax investigation has taken place so long as it is not an ongoing case of suspected serious tax fraud, or a criminal tax investigation.
Neither can you participate in the MDF if you have taken part in, or been personally notified of, one of the other disclosure facilities mentioned above.
How does it work?
In the MDF, details of the voluntary disclosure and liabilities and, more often than not, payment must be made at the time of application. HMRC then aims to review the disclosure and conclude the issue within nine months of the application.
Although this is a relatively short time to conclude a tax investigation, there is the risk of doing the necessary the work, making payment, applying to participate in the MDF and then being rejected.
Of course, you may not be able to apply if a tax investigation has started while the disclosure is being completed, and there is, of course, no immunity from prosecution. While prosecution is reserved for the most serious cases, this is a worry, especially as HMRC are aiming to increase the number of prosecutions threefold.
In contrast, with LDF application is made to participate and, upon acceptance, a report is prepared, the liabilities calculated and payment made with a maximum time frame of 11 months.
So, if you are not accepted into the LDF you will still have a problem, but you haven’t given HMRC all the information they need to decide whether to prosecute, and you won’t yet have incurred professional fees which might have been better spent on a different strategy.
What are the benefits?
- HMRC will not seek tax on undeclared funds arising before 1 April 1999. This can represent a substantial financial saving as usually where there is tax due prior to 1999 the interest exceeds the tax. Outside a disclosure facility, HMRC can usually go back 20 years.
- Penalties will be payable at a much reduced level, being 10% for years prior to 2009, 20% for 2009/10, possibly rising to 40% if the undisclosed funds were held in a ‘category 3’ jurisdiction, such as many of the Caribbean Islands. But compared to a maximum of 200%, this is still a good deal.
- An increased likelihood of a shorter and less traumatic investigation, and the knowledge that at the end of it, the funds will be ‘clean’.
- A ‘bespoke’ service, meaning a single point of contact within HMRC who will deal with your voluntary disclosure. This means there is a possibility of approaching HMRC on a ‘no-names’ basis to establish whether you are eligible. Our experience has shown that the single point of contact means that voluntary disclosures are dealt with more efficiently and speedily than you would otherwise expect, and often with more insight.
- The possibility, in certain cases, of paying by instalments
Is it suitable for me?
Every case is different, so you need to discuss it with a specialist advisor. However, on reading the documents bringing the MDF into being, there seems very little reason to choose the MDF over the LDF. The only benefits we could see were:
- There is no minimum deposit (yet) in the Isle of Man, so it may be possible to create a footprint by transferring less money than required by the LDF.
- The Isle of Man is more familiar to many people, which may make it more comfortable or practical.