United Kingdom
The Liechtenstein Disclosure Facility - Dawn Register
On 11 August 2009 HM Revenue & Customs (HMRC) announced the ‘Liechtenstein Disclosure Facility’ (LDF). The LDF is launched on the back of a new Tax Information Exchange Agreement between the UK and Liechtenstein. In addition to this, a Memorandum of Understanding (MOU) between the two countries is designed to eliminate all UK tax evasion with a Liechtenstein connection by 31 March 2015.
The agreement is broad and covers bank accounts, companies, trusts, foundations, partnerships and even insurance policies. Settlors and beneficiaries of trusts may also be included.
In my view, this is an unprecedented move by HMRC and unlike the recently announced New Disclosure Opportunity (NDO), the LDF can be regarded as a genuine, albeit only partial, tax amnesty.
The LDF runs from 1 September 2009 to 31 March 2015. Only unpaid taxes from up to the past 10 years are due, compared with the NDO (and normal statutory time limits) of up to 20 years. As with the NDO, participants will qualify for a fixed penalty of 10% of the tax due which is low compared to the otherwise 100% maximum that can apply in other cases.
In my view the LDF is a welcome facility from HMRC. Some helpful aspects are that the LDF specifically covers all UK taxes including inheritance tax, whereas outside the LDF there is no time limit on inheritance tax. There is the ability to transfer certain assets into Liechtenstein to specifically take advantage of the LDF (and hence the 10 year time limit). The transfer of assets into Liechtenstein is not a straight forward process and will require expert advice on a case by case basis.
From my experience, most assets are held in Liechtenstein through structures such as Foundations, Stiftungs and Anstalts. HMRC will provide guidance on the previously uncertain UK tax treatment of these entities, however every case will be judged on its own merit which still gives a certain room for negotiation.
The LDF process is complex. All disclosures need to be made to Specialist Investigations within HMRC and therefore require a Tax Investigations licence holder to be involved. Anyone who is UK resident with a connection to Liechtenstein monies will need to check they are UK tax compliant. This is a great opportunity for people to come forward and regularise their tax affairs, if not the consequences under an investigation opened by HMRC are likely to be much more severe. It is also a good opportunity for us to assist other accountants, trustees and bankers through our Tax Investigations practice.
Please contact me at dawn.register@bdo.co.uk or 020 7893 2653 or Fiona Fernie at fiona.fernie@bdo.co.uk or 020 7893 2685