The Pandora Papers

Anyone who has received a letter from HMRC is advised to seek specialist advice at the earliest opportunity.

Given the use of offshore centres and structures which HMRC believes are commonly associated with tax evasion, along with allegations of hidden assets, tax avoidance and corruption against individuals named in the documents, HMRC is naturally extremely interested and has established a dedicated team for this campaign, and will likely escalate investigations into individual taxpayers if prompt action is not taken after receiving the letter.

HMRC’s letter indicates that penalties of up to 200% of any underpaid tax liabilities may be charged, under the ‘Failure to Correct’ penalty regime for offshore tax matters, and warns taxpayers that they may face prosecution or criminal action if their tax affairs indicate dishonest or fraudulent behaviour.

In such cases a disclosure under the Contractual Disclosure Facility (CDF), also known as Code of Practice 9 (COP9) should be made, as this is the only disclosure route which secures immunity from prosecution in exchange for a full disclosure of all deliberate and non-deliberate tax irregularities. Where irregularities do not involve fraudulent behaviour, alternative routes such as the Worldwide Disclosure Facility (WDF) for disclosures of offshore tax matters may be more appropriate.

What is in the papers?

The documents involve 14 offshore financial services providers who specialise in incorporating Trusts, companies and other structures to hold individuals’ income and assets. These providers are often based in low tax jurisdictions seen as having lower levels of transparency and governance. The documents have already implicated high-profile individuals including influential politicians and businesspersons, and it is the largest release of such information following the Panama and Paradise Papers in 2016 and 2017.