News
HMRC launches Liechtenstein Disclosure Facility - 2009-08-17
Hard on the heels of the announcement of a New Disclosure Opportunity or NDO for those with undisclosed offshore accounts, HM Revenue & Customs (HMRC) has announced a separate disclosure facility for those with accounts or assets in Liechtenstein.
Under an agreement between the UK and Liechtenstein governments, banks and financial intermediaries in Liechtenstein will be forced to identify clients who they suspect may be liable to tax in the UK. Once identified, the client will be required to provide proof of one of the following:
- that they are not liable to UK tax,
- that they are complying with their UK tax obligations, or
- that they have signed up to HMRC's "Liechtenstein Disclosure Facility" (or LDF).
If they don't, their accounts will be closed.
Details of the scheme
The LDF will run from 1 September 2009 until 31 March 2015. The scheme will enable eligible people to settle UK tax liabilities in relation to their Liechtenstein accounts going back up to 10 years, together with interest and a favourable penalty rate of 10% in most cases. Accounts held outside of Liechtenstein will not be treated so favourably, and people who were written to under the 2007 disclosure opportunity will probably suffer a penalty rate of 20%. Those who are already under investigation by HMRC, or who have been previously investigated but failed to disclose their Liechtenstein account, could face even higher penalties.
Cases deemed by HMRC to be due to "innocent errors" will only need to disclose a maximum of six years unpaid tax and there will be no penalty. HMRC will also give those who come forward now assurance that they will not be prosecuted for tax evasion unless the source of the money represents the proceeds of criminal activity (other than tax evasion of course). They will also not be named and shamed on the HMRC website as tax defaulters under measures announced in the 2009 Budget.
How to get started
The details of the scheme are very complex and the relevant legislation has still to be implemented in Liechtenstein. If you wish to make a disclosure you will be able to register with HMRC from 1 September 2009. Once registered, you will normally have six months to complete your disclosure; however, the terms are more flexible than previous disclosure facilities in that it may be possible to extend the timetable for both disclosure and payment. You can also elect to apply a special composite tax rate of 40% to cover all taxes on an annual basis without the benefit of any relief or deduction. For those with more complex structures, HMRC has laid down guidance on how various Liechtenstein entities, such as Anstalts and Stiftungs, will be categorised for UK tax purposes.
There are material differences between the LDF and other disclosure facilities announced so far by HMRC. In particular, the limitation of disclosure to ten years is, we believe, a significant incentive. The recently announced NDO requires disclosure of up to twenty years' tax arrears.
If you need assistance with a disclosure or wish to discuss your tax affairs in the light of the LDF, please contact your usual Littlejohn private client tax adviser or email senior tax consultant Barry Luscombe at bluscombe@littlejohnllp.com
