LDF: Frequently Asked Questions
Q. What is the Liechtenstein Disclosure Facility?
A. It is an opportunity for people who have not paid the right amount of tax linked to assets or investments in Liechtenstein to do so for a reduced amount of tax with a smaller penalty than might otherwise arise and without any HMRC investigation.
Q. How long does the Liechtenstein Disclosure Facility last?
A. It opened on 1 September 2009 and will close by 31 March 2015.
Q. Does HMRC know about my Liechtenstein assets or investments?
A. It may do. However, under an agreement between the UK and the Liechtenstein Government, financial intermediaries in Liechtenstein will be obliged to identify clients where UK tax may be an issue and encourage them to disclose UK tax liabilities. Client refusal will mean the financial intermediary in Liechtenstein will no longer be able to act. In addition there is now a Tax Exchange Agreement between the UK and Liechtenstein.
Q. My Liechtenstein assets or investments have nothing to do with evasion of UK tax. What should I do?
A. Many offshore accounts will indeed have nothing to do with tax evasion. People may have declared the interest arising, there may be no interest at all, the capital may have come from an inheritance, a gift or taxed sources, the owner may be non-domiciled in the UK and has not remitted any income arising. However, it would be wise to take professional advice. In addition, HMRC have published the number of a Help Desk.
Q. As well as assets in Liechtenstein I have other offshore bank accounts in relation to which UK tax is due. Do these accounts come within the LDF?
A. No. The LDF only applies to assets or investments in Liechtenstein, but you may be able to use the New Disclosure Opportunity if you registered by 4 January 2010. Also see next Q&A.
Q. I have an offshore account outside Liechtenstein. Could I transfer assets into Liechtenstein and so take advantage of the LDF?
A. In some cases this may well be possible. You will need to take specialist advice
Q. How many years of tax will HMRC want to recover under the LDF?
A. Ten. This is significantly more advantageous than under the normal rules of UK tax or the parallel New Disclosure Opportunity.
Q. Because of the unusual tax structures in Liechtenstein it will be very complicated to work out the tax. Is there an easy way of doing this?
A. In some case a special composite rate of 40% will be applied.
Q. What are the UK equivalents of these unusual tax structures in Liechtenstein?
A. Details are on the HMRC web site.
Q. Will interest be due on that tax?
A. Yes
Q. Will HMRC require a penalty and if so how much?
A. HMRC will want a penalty. The penalty will be 10% if you did not have a previous chance to disclose. It will be 20% if you could have disclosed under the 2007 disclosure facility. After an HMRC investigation the penalty would probably be greater.
Q. Why should I take part in the Liechtenstein Disclosure Facility?
A. This is an excellent chance to resolve tax liabilities related to Liechtenstein at a reduced penalty and for only ten years of tax. Sorting out one’s tax affairs in this relatively low key way will give certainty for the future, avoid any risk of criminal prosecution, probably avoid a detailed HMRC investigation- which can be expensive in time, compliance costs and professional fees.
Q. Is there any guarantee that there will be no criminal prosecution?
A. HMRC guarantee that there will be no prosecution, “unless the source of the funds from which the relevant person has benefited or may benefit constitutes “criminal property” within the meaning specified in section 340 of the Proceeds of Crime Act 2002 (provided that the definition of criminal property for this purpose will not include property that has arisen solely as a result of illegal tax evasion)”.
Q. Will I be investigated if I make a disclosure?
A. HMRC will not give an absolute guarantee that you will not, but it is very unlikely if you make a full disclosure. Under the Offshore Disclosure Facility of 2007, 45,000 people came forward and nearly all disclosures were accepted. Specialist professional advice is essential.
Q. I was contacted by HMRC in 2007 and could have come forward then but didn’t. Where do I stand?
A. This opportunity is available for you although the penalty will be 20% of the tax and NIC.
Q. I have been investigated by HMRC before but I didn’t tell them about these assets or investments. Can I use the LDF?
A. Yes. But the penalty will be calculated in accordance with HMRC’s usual methods and will probably be a good bit more than 10%. It is imperative that you seek advice from a tax investigations specialist on your circumstances.
Q. HMRC are investigating me now. Can I use the LDF?
A. It depends on the nature of the HMRC enquiry. But possibly not. It would be wise to take specialist advice.
Q Is the LDF a good deal?
A. It is a great deal.
Please call Iain Macleod on 07920 146800 for a free confidential discussion or email imacleod@edftax.co.uk
