Liechtenstein Disclosure Facility (LDF)a favourable way to become UK tax compliant

The United Kingdom and Liechtenstein signed a Tax Information Exchange Agreement (TIEA) including a Memorandum of Understanding (MOU). The MOU contains a unique five-year disclosure opportunity called the “Liechtenstein Disclosure Facility” on 11th August 2009. The LDF gives UK taxpayers, both natural persons and legal entities, the chance to become UK tax compliant provided Her Majesty’s Revenue & Customs (HMRC) has not initiated investigation proceedings against the taxpayer for an alleged tax offence. Compared with the “New Disclosure Opportunity” (NDO), HMRC’s general disclosure programme, the LDF offers much more favourable terms. Among others, penalties are considerably lower and there is an assurance that no criminal investigation will be commenced provided a full disclosure is made and the funds do not originate from any offence other than tax evasion. Another advantage is the protection of existing and new clients during the entire voluntary disclosure period, i.e. from 1 September 2009 until 31 March 2015. In most cases, the Liechtenstein Government has the right to decline an information request made by HMRC prior to 1 April 2015 about any UK client of a Liechtenstein financial intermediary (e.g., a bank or trust company). This does not, however, apply if HMRC has initiated criminal proceedings against the taxpayer.

The “Liechtenstein Disclosure Facility” has been available since 1 September 2009 and will terminate on 31 March 2015. It is possible for UK taxpayers having undeclared assets in another jurisdiction to transfer these assets to Liechtenstein in order to take advantage of the LDF. In most cases, an early disclosure of undeclared assets will prove advantageous as the amount of recoverable tax arrears and the risk of detection rise over the years.

Disclaimer:

The above is a summary of the LDF and the information available from HMRC and the Government of Liechtenstein as at 10 December 2009 and constitutes no legal advice. If you are a person who is liable to UK taxation or who is resident for tax purposes in the UK, or if you think that you may be liable to UK taxation, we strongly recommend that you seek UK tax advice from a specialised UK tax advisor. We will be happy to assist you in the selection of an expert through our network.