HMRC nudges taxpayers named in the pandora papers

HMRC are running a campaign to encourage taxpayers named in the Pandora Papers to check their UK tax returns are correct and tell HMRC if they need to correct them.

The Pandora Papers consist of 11.9 million leaked documents with 2.9 terabytes of data that the International Consortium of Investigative Journalists (ICIJ) published in October 2021. This leak exposed offshore accounts held via multiple overseas jurisdictions.

What HMRC has done with the data

We understand HMRC has reviewed the data (comparing it to other information it holds via its Connect database) to identify any UK taxpayers who it considers may owe more tax. This includes comparing information to the UK tax returns the individuals have submitted in past tax years to see if they were correct.

These individuals will be getting a nudge letter which gives them just 30 days to check if their UK tax affairs are correct and up to date and then tell HMRC about any corrections needed.

What happens if you don’t respond to this ‘nudge’?

This is a serious warning letter. It may be that no additional tax is due. However careful checking and specialist advice is recommended in any reply.  HMRC will have a mismatch in data and suspect something has gone awry – so it is not going to let things lie if a taxpayer does not respond to this prompt.

HMRC’s letter makes clear that it may investigate the individual’s tax returns further. When HMRC starts such an enquiry, depending on the nature of the omissions or mistakes made, it can look back up to 20 years to check whether additional tax is due. If there is extra tax due, HMRC will charge tax-geared penalties, these can run up to 200% of any tax due in the worst cases.

HMRC may prosecute them if HMRC believe they have been dishonest about their tax affairs.

You can view the sample letter being issued by HMRC on the CIOT website.

How to put things right quickly

Anyone who has received this nudge letter or was named in the Pandora Papers and has not already addressed the issue should act now.

There are several ways to tell HMRC about omissions or mistakes made in your tax returns. It is best to seek specialist tax advice on your specific circumstances, but the options can include:

• Where mistakes were not made deliberately – the Worldwide Disclosure Facility for offshore tax errors.
• In other cases - the Contractual Disclosure Facility (Code of Practice 9) may be appropriate as it provides protection from criminal investigation and prosecution when accepted by HMRC.