The Liechtenstein Disclosure Facility (LDF) is a disclosure process which is currently unique in the United Kingdom tax system.
LDF gives taxpayers the opportunity to disclose their tax irregularities relating to holdings in offshore bank accounts, investments and various other structures, on the HMRC’s most generous terms yet:
- Guaranteed immunity from being prosecuted;
- “naming and shaming” will not apply;
- Ability to have an initial “no names” discussions with HM Revenue & Customs (HMRC), before any disclosure is made;
- The maximum time period for disclosure is 20 years; however under the Liechtenstein Disclosure Facility the HMRC only necessitates disclosure from 6 April 1999;
- A flat penalty of 10% will be charged on the tax liability to the 2008/09 tax year and 20% on tax liabilities arising thereafter; and
- For Inheritance Tax liabilities there is no maximum time period for disclosure but the Liechtenstein Disclosure Facility will also limit the disclosure requirements from 6 April 1999 onwards.
Although the Liechtenstein Disclosure Facility is meant for UK taxpayers with tax irregularities connected to their holdings in Lichtenstein, it can also be used by taxpayers without any existing holding in that country. By opening a bank account in Liechtenstein, previously ineligible taxpayer can qualify to participate in the Liechtenstein Disclosure Facility.
There are certain terms and conditions that need to be met to fully qualify for the Liechtenstein Disclosure Facility:
- Original offshore account must not have been opened by a UK branch or agency;
- You were not under investigation by the HMRC on 11 August 2009;
- You have made full disclosure in a prior investigation; and
- You have not been contacted by the HMRC in writing with regard to its previous disclosure facilities – the Offshore Disclosure Facility or the New Disclosure Opportunity.
If these conditions are not met you may still qualify for the Liechtenstein Disclosure Facility but certain terms will be restricted.
An interesting note on this is that the HMRC is implementing a new Offshore Tax Evasion Strategy for 2013 and beyond. A Memorandum of Understanding between the Isle of Man Government and HMRC has already been signed and further agreements are expected between the HMRC and Guernsey and Jersey. Information will soon flow between the HMRC and these countries potentially exposing a large number of tax irregularities.
The HMRC is quite clear; their compliance activity on offshore irregularities is going to be aggressive and long term. The net is closing fast on non disclosure of tax and the possible outcomes of not disclosing your offshore tax irregularities can be very unpleasant:
- Intrusive investigations;
- Steep penalties with potential highs of 200%;
- Criminal prosecution in the courts; and/or
- “Naming and shaming”.
For this reason and the Liechtenstein Disclosure Facility expiring in April 2016 it is highly advisable to disclose any tax irregularities as soon as possible. There are further reasons to avoid delaying disclosure:
- Interest is payable on your tax liability; and
- If the HMRC contacts you first you may not be eligible for the Liechtenstein Disclosure Facility or any of the possible future disclosure facilities
Contact us for more information and advice on 020 8780 2349.
This blog is a general summary. It should not replace professional advice tailored to your specific circumstances.