Pandora Papers – HMRC’s latest round of nudge letters: what action is required?
In October 2021, a massive leak of financial information known as the Pandora Papers was instigated by the International Consortium of Investigative Journalists (ICIJ). This is the same organisation who leaked the 2016 Panama Papers.
The Pandora Papers leak involved circa 12 million files, obtained from 14 offshore providers. The data includes information relating to business leaders, politicians and celebrities from over 90 countries. This included information on their use of trusts, involvement in offshore countries alongside actions used to potentially conceal assets and avoid tax.
HMRC’s action on the Pandora Papers
It is understood that HMRC has analysed the leaked documents and identified those with potential non-compliance or tax evasion behaviour. It has requested further information from overseas countries to obtain more comprehensive data regarding those concerned. HMRC announced in June 2023, that it began sending ‘Nudge Letters’ to those it has identified.
What action to take if you receive a Nudge letter?
If you have received a letter from HMRC regarding the Pandora Papers or any other campaign, the advice is to take immediate action. Recent nudge letters have included landlord rent deposit schemes, overseas assets, Crypto tax, let properties and second property ownership. Failure to act is extremely likely to result in HMRC opening a formal investigation and coming directly for you. Furthermore, a HMRC investigation is likely to result in tougher penalties and in the case of deliberate fraud, criminal proceedings.
Pandora Papers – how to disclose information
There are two routes to disclose offshore assets to HMRC:
Worldwide Disclosure Facility (WDF) – This facilitates the disclosure of UK tax liability which stems from offshore assets or income. If, however, fraud is involved, the Contractual Disclosure Facility (below) may be a better option. This is because disclosures under the WDF does not provide immunity from prosecution.
Contractual Disclosure Facility (CDF) – offering immunity against prosecution in return for full and frank disclosure of all tax fraud and non-deliberate behaviour events. It is very important not to mislead or attempt to conceal anything at all, as this could lead to criminal prosecution by HMRC.
Early, full cooperation and the willingness to normalise tax matters can help reduce the severity of penalties levied by HMRC.
HMRC action for non-disclosure following receipt of a nudge letter or tax avoidance
Anyone receiving a nudge letter from HMRC can safely assume that HMRC has information relating to their activity. On this basis, choosing not to disclose activity to HMRC can result in severe consequences, which will include more sever penalties and the possibility of criminal prosecution in many cases. Where offshore assets are concerned the penalties can be even more severe, there could be other legal consequences, civil percussions or asset freezing or forfeiture.
Alexander & Co – assistance with nudge letters, HMRC disclosures and investigations
If you have received a nudge letter relating to the Pandora Papers, or indeed concerning any other matter, it is best to take immediate action. At Alexander & Co we have experience of this and can assist with HMRC disclosures and Investigations.
We advise a wide range of clients on many tax and accountancy matters. These include property tax, crypto tax, overseas assets, trusts and other company structures.
To discuss how we can assist you, please contact us using the form on this page or email firstname.lastname@example.org. We will then be in touch to explain how we can assist you.