HMRC launched this voluntary disclosure facility, Profit Diversion Compliance Facility (PCDF), in January this year and published guidance about the Facility at that time.
The Facility is targeted at those businesses which may have taken actions targeted by the Diverted Profits tax and if those actions were investigated the businesses would have more tax to pay plus interest and penalties.
Registration for the PCDF enables multinational companies to review and change arrangements, without the burden of an HMRC investigation in the review period, putting forward a report with proposals to pay any additional tax, interest and penalties due. In return they can expect to enjoy a number of benefits including a more efficient and controlled investigation and likely more favourable penalty treatment from disclosing.
To encourage take up of the PCDF HMRC sent out a number of “nudge” letters to businesses at the time the PCDF was launched. The businesses that were targeted were those HMRC thought were high risk and likely not to be paying the correct amount of tax.
HMRC is now, we understand, about to send out a second tranche of “nudge” letters to businesses which they also believe are not paying the correct amount of tax. It seems likely that if businesses do not respond after receipt of a nudge letter that they will be subject to a full scale investigation.