HMRC’s Christmas Nudge: Pandora Papers

With the festive season fast approaching, HMRC has released the latest round of nudge letters urging taxpayers to review their tax affairs in light of the Pandora Papers data leak.

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Dominic Arnold and Clare Halligan
Published: 18 Dec 2023 Updated: 18 Dec 2023
Business tax Tax

What are “the Pandora Papers”?

The largest data leak whereby almost 12 million documents were released, exposing significant hidden offshore wealth.  

The leak occurred in October 2021 and HMRC has since been reviewing the data to identify the UK taxpayers named within the documents.

In June 2023 HMRC commenced its compliance response and distributed “nudge letters” to some taxpayers who had been named. The letters prompted these taxpayers to review their tax affairs and check that they were correct. A second tranche of letters, to another group of taxpayers, was issued the week commencing 11 December 2023.

What does HMRC’s letter say?

The opening statement makes it clear that HMRC is writing to you as you have been named in the Pandora Papers.

The letter will ask you to review your UK tax returns and make sure that all overseas income or gains has been accurately reported. Where inaccuracies are determined, HMRC advises that penalties of up to 200% may be charged on any tax due.

As this next tranche of letters is being issued so close to the holiday period, HMRC has offered an extended period of 60 days to take steps to respond to the letter.

What should I do if I have overseas income or gains to report?

You will need to tell HMRC if your tax affairs are not up to date, this includes errors within tax returns or where you have failed to file a tax return. You can tell HMRC of any errors through a disclosure.  

There are different avenues to make a disclosure to HMRC and it is strongly advisable to consult with a specialist tax professional who can advise on the best route, as this will depend on your circumstances.

The letter advises that HMRC may prosecute where there has been dishonest behaviour. To manage this risk, it may be appropriate to make a disclosure under the Contractual Disclosure Facility (“CDF”), as this would offer protection against criminal prosecution. Should HMRC accept you into this facility, your disclosure would be reviewed through a Code of Practice 9 (“COP 9”) enquiry.

The alternative route would be to file a disclosure via the Worldwide Disclosure Facility (“WDF”); however, this does not offer any similar protection against criminal prosecution.

What happens if I do not respond to this letter?

The letter advises that if you think your tax affairs are correct than you do not need to do anything.

Doing nothing is not an approach we would recommend. HMRC has written to you as your name has appeared in the Pandora Papers, this would suggest you have connections with an offshore asset which may not have been reported correctly.   

It is likely that HMRC will need further information before it is comfortable with closing your case and is therefore likely to open an enquiry into your tax affairs. Writing to HMRC to tell it you have checked your tax returns and believe they are correct would be a more proactive and robust approach.   

How can Evelyn Partners help me?

Our Tax Dispute Resolution team specialise in resolving tax problems with HMRC. We have helped many clients make disclosures to HMRC in respect of their offshore assets.

This latest tranche of letters is likely to be received within the next couple of days. Our team are working throughout the holiday period, so if you have received a letter and would like to speak to us in confidence, please contact us at any time on 0800 008 6816 or 0202 8334 1010 or by emailing us at taxdisputes@evelyn.com 

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By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication.

Tax legislation

Tax legislation is that prevailing at the time, is subject to change without notice and depends on individual circumstances. You should always seek appropriate tax advice before making decisions. HMRC Tax Year 2023/24.