United Kingdom
The Liechtenstein Disclosure Facility: An Update - Richard Morley
Last year on 11 August HM Revenue & Customs (HMRC) announced the ‘Liechtenstein Disclosure Facility’ (LDF). As of 31 March 2010, 419 cases had been registered under the LDF with HMRC. We understand that since then considerably more cases have been registered. Possibly not the numbers HMRC were hoping for since the facility has been open for almost a year but nevertheless, the LDF is open until March 2015 so there remains plenty of scope for HMRC to secure the reported £1bn or so they hope to raise through this genuine, albeit partial, amnesty.
Interestingly, and this is certainly our experience, the majority of cases being registered under the LDF relate to monies held outside Liechtenstein. A particular benefit of the LDF is the ability to ‘create’ a connection in Liechtenstein e.g. open a bank account, and still be able to qualify for the beneficial terms of the facility. We are frequently asked whether this is some sort of gimmick or scam but the reality is HMRC could not be happier with this arrangement. Not only are they securing voluntary disclosures over and above those relating to already established accounts in Liechtenstein, they also hope that the ability to move funds into Liechtenstein will place an element of pressure on those jurisdictions from where the funds derive to encourage them to consider similar disclosure facilities. To date, there are no signs of say, a Switzerland or a Panama disclosure facility but then just over a year ago, a Liechtenstein disclosure facility was unheard of - definitely a case of ‘watch this space’!
In my view the LDF has proved an extremely welcome facility from HMRC and it has not been too difficult to explain the benefits to potential clients in getting them to come forward voluntarily – a process that historically has been rather more difficult. In my opinion this merely highlights the main benefits of the LDF; namely a reduced liability period, immunity from prosecution, ease of process etc.
A particularly beneficial aspect of the LDF that we have seen in several cases is that it can specifically eradicate additional inheritance tax where death occurred prior to 6 April 1999 (the earliest date HMRC can go back under the LDF) or even after 6 April 1999 by way of an election to be taxed under the ‘composite rate’.
Part of the deal between HMRC and Liechtenstein is that all financial intermediaries in Liechtenstein are required to review UK resident clients and obtain confirmation that the assets managed are either declared or are in the process of being declared under the LDF. The relevant law in Liechtenstein was recently approved and is due to be formally introduced on 1 September. We certainly anticipate some additional interest in the LDF and enquiries about it as a result of this.
From my experience, the LDF is proving very attractive for those with undeclared overseas funds but much depends on the recommendation of their overseas advisor banks or trust companies, some of whom remain in denial about the need to disclose. I am expecting this to continue to change with facilities such as Liechtenstein’s and who knows, we may be talking about other countries’ disclosure facilities this time next year?