HMRC began a one-to-many campaign targeting taxpayers named in the Pandora Papers in 2023. The Pandora Papers comprise 11m records from 14 offshore financial service providers, which were released by the International Consortium of Investigative Journalists during 2021 and 2022. The providers specialise in incorporating companies and other entities in low or no tax jurisdictions.  

HMRC continues to review the Pandora Papers and is sending a further set of letters to taxpayers, who may not have paid the correct amount of UK tax on foreign income and gains. HMRC has reviewed the person’s tax returns, compliance history and any disclosures made before issuing the letter. The letter states which entity or entities the customer is linked to and sets out the tax risks identified by HMRC.  

Responding to the letter 

The taxpayer is asked to check that they have told HMRC about their UK tax liabilities on all overseas income and gains. The deadline for doing this is 60 days from the date of the letter. The taxpayer can direct any questions they have to their HMRC customer compliance manager if they have one. HMRC recommends that the taxpayer seeks professional advice if they are unsure. The letter reminds the taxpayer that penalties of up to 200% may be charged on the tax due on any overseas income and gains not declared.   

No further action is required where the person believes that their tax affairs are correct and up to date.  Where the taxpayer needs to update HMRC about their tax affairs, the letter directs them to Tell HMRC about the underpaid tax. If the taxpayer is still within the amendment window for the tax year, they can make any required amendments to their return for that year.  

It is important that the taxpayer uses the correct disclosure facility. The contractual disclosure facility (CDF) is only suitable for taxpayers who want to admit to tax fraud. By entering the CDF, a taxpayer will: 

• admit that their deliberate conduct has brought about a loss of tax;
• tell HMRC about all the tax losses brought about by their deliberate conduct;
• give as much detail as they can within 60 days of being offered the contract;
• provide additional details, in the form of a report, following the 60-day period which includes a statement that they have given HMRC complete and accurate details of their deliberate conduct. 

In turn, HMRC will agree not to criminally investigate with a view to prosecuting them for the deliberate conduct they admit to in the CDF contract. 

The worldwide disclosure facility (WDF) is available to anyone who wants to disclose a UK tax liability relating to: 

• income arising from a source in a territory outside the UK;
• assets situated or held in a territory outside the UK;
• activities carried out wholly or mainly in a territory outside the UK; or
• anything having effect as if it were income, assets or activities of a kind described above. 

Any eligible user of the WDF must make a full disclosure of all previously undisclosed UK tax liabilities and calculate interest and penalties based on the existing legislation. Provided the disclosure is correct and complete, and the taxpayer fully co-operates by supplying any further information requested, HMRC will not seek to impose a higher penalty except in specific circumstances.  

The WDF does not provide any protection from prosecution. Where there has been deliberate and/or fraudulent conduct such as evasion, the CDF is the more appropriate facility. Anyone unsure about which facility to use should seek specialist advice. 

Extension of the campaign to agents 

HMRC has indicated that it will also be trialling an agent approach. This will involve HMRC contacting some agents who represent customers mentioned in the Pandora Papers to discuss their client’s tax position. HMRC states that if this approach proves to be effective, it will consider rolling it out further.