Advantages of Liechtenstein Disclosure Facility (LDF)for existing and new clients

The Liechtenstein Disclosure Facility (LDF) provides UK taxpayers holding undeclared investments outside the UK with an opportunity to become UK tax compliant. Several jurisdictions worldwide have signed tax information exchange agreements with the UK and many will follow, but only the Liechtenstein agreement offers favourable disclosure terms. The LDF is open not only for persons already having undeclared assets in Liechtenstein but also for those moving their assets held in another jurisdiction to Liechtenstein by 31 March 2015 in order to take advantage of the LDF.

Summary of the LDF advantages:

• The assessment period is limited to accounting periods commencing on or after 1 April 1999. Recovery of tax arrears will not go back any further. By contrast, the general recovery period is 20 years.

• The taxpayer has the option to choose whether to calculate the actual tax liability on an annual basis or to make use of a composite rate of 40% applied to all income, profits, capital gains and other sums chargeable.

• A fixed penalty of 10% of the tax payable (excluding interest) is levied in addition to the unpaid tax and interest.

• HMRC will accept reasonable offers for the payment of the tax where it is only possible to estimate the liability. Taxpayers using the LDF will be excluded from the “naming and shaming” procedure announced by Her Majesty’s Revenue & Customs (HMRC).

• HMRC has set up a “Liechtenstein Desk” as a single point of contact for disclosure under the LDF. The Liechtenstein Desk can be contacted on a no-names basis by the taxpayer or by counsel before disclosure.

• There is an assurance against criminal investigations for a tax-related offence provided a full, accurate and unprompted disclosure is made and the funds do not originate from criminal activity (e.g. money laundering). Criminal activity, in this respect, does not include tax evasion.

• Where an innocent error has been made no penalty will be levied and the liability of natural persons will be further limited to 6 tax years as of the time of the disclosure application.

• Liechtenstein has the right to decline a tax information request made by HMRC prior to 1 April 2015 relating to any existing or new UK client of a Liechtenstein financial intermediary (bank, trust company etc.). However, no protection will apply in cases relating to criminal tax matters in respect of which HMRC has already commenced a criminal investigation.

• The LDF applies to all UK taxes including inheritance tax, income tax, corporation tax, capital gains tax, stamp duty, value added tax and national insurance contributions.

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 adviser. We will be happy to assist you in the selection of an expert through our network.