Liechtenstein Disclosure Facility (LDF)
HMRC have announced a special amnesty for UK people with accounts in Liechtenstein to be known as the Liechtenstein Disclosure Facility (LDF). Those already under investigation by HMRC will not be able to take advantage of the LDF.
But for others who have yet to disclose this is a great opportunity.
In some cases it is possible to switch funds from an offshore jurisdiction to Liechtenstein and so take advantage of its beneficial terms.
Under the LDF HMRC say there will be no criminal prosecution if a complete and voluntary disclosure is made; the only exception to this promise is if the source of funds is criminal property (S340 Proceeds of Crime Act 2002).
Also, the LDF will only seek to collect tax for ten years as against twenty under the New Disclosure Opportunity (NDO) and the penalty will be restricted to 10%. There are exceptions to the 10% penalty. If the person concerned was contacted by HMRC under the 1997 Offshore Disclosure Facility then the penalty will be 20%. If the person was previously investigated and failed to disclose Liechtenstein assets then the penalty will be “significantly higher”. But if the person can show the understatement of UK tax was due to innocent error HMRC will seek only six years of tax and no penalty.
In some case a simple composite rate can be used which will make quantification much easier.
Under new agreements between the UK and Liechtenstein the principality will introduce a five year compliance programme the objective of which is that after five years no UK people will use Liechtenstein to evade UK tax. Financial intermediaries in Liechtenstein will have a duty to identify those who they think have UK liabilities and, for those who refuse to comply with a new certification process, to refuse to act. Incentives and sanctions such as fines on the property are being considered to encourage people to comply. Also, a Tax Exchange Information Agreement with Liechtenstein has been agreed and a Double Taxation Agreement will be negotiated.
HMRC say “The LDF is a special service to support the reviews to be carried out by the Financial Intermediaries in Liechtenstein to identify those who may have liability to UK tax. The LDF allows people with unpaid tax linked to investments or assets in Liechtenstein to settle their tax liability under this special arrangement.”.
The LDF will run from 1 September 2009 until 31 March 2015. However, the NDO closes on 31 January 2010. The Liechtenstein Help Desk and telephone lines opened on 1 September 2009.
HMRC have posted on their website basic information about the LDF and FAQ’s for anyone who thinks they may qualify.
More details are available at
http://www.hmrc.gov.uk/international/liechtenstein.htm
For professional, confidential and specialist advice on your next steps call Iain Macleod at EDF Tax LLP, on mobile 07920 146800, email imacleod@edftax.co.uk or complete our enquiry form.
