Tax amnesty: Act now on Liechtenstein Disclosure Facility (LDF)
Thousands of Swiss bank account holders and others have already come forward to settle unpaid UK tax bills and avoid costly tax penalties – but the LDF window won’t be open for ever.
The Liechtenstein Disclosure Facility (LDF) was launched in 2009 and continues to be available until 5 April 2016. It allows people with unpaid tax linked to investments or assets held overseas at 1 September 2009 to settle their tax liability under favourable terms. To date more than 5,000 registrations have been made with HM Revenue & Customs (HMRC).
Our tax investigations specialists have completed almost 300 of these disclosures and have a 100% acceptance rate. The LDF has been particularly useful where the taxpayer has a Swiss bank account and needs to become UK tax compliant owing to the UK-Swiss agreement, which came into force on 1 January 2013.
To re-cap, Swiss bank account holders caught by the UK-Swiss agreement were faced with a choice. Either:
- maintain anonymity from HMRC and suffer a one-off deduction from the Swiss account on 31 May 2013 in respect of undeclared tax in the past and an annual deduction to meet on-going tax obligations; or
- avoid the deductions by agreeing to make a disclosure of unpaid taxes in relation to the account (if any) and sacrifice the right to anonymity.
Swiss banks provided details to the tax authorities in Switzerland of those account holders who agreed to make a disclosure. The Swiss tax authorities, in turn, have now written to HMRC with the identities and account details of UK taxpayers from whom disclosures are expected. This has triggered HMRC to write to those UK residents to check where they are up to with regard to coming forward.
Threat of criminal investigation
HMRC’s letter demanded a reply from recipients by 2 November 2013. A second wave of letters have now been issued which require a response by 28 February 2014. The letters warn that failure to reply could give rise to a “detailed investigation” and possibly a “criminal investigation”.
Three certificates were included within the letter, one of which was due to be signed and returned by the relevant due date:
- Certificate A was a declaration that no additional tax is due.
- Certificate B declared that a disclosure had or was due to be made via the LDF.
- Certificate C declared that a disclosure was due to be made outside of the LDF.
We are aware that some individuals in receipt of the latest Swiss account letters issued by HMRC will already be part way through the LDF disclosure process. Such individuals should sign and return certificate B to HMRC.
Other individuals may not yet have engaged a specialist to deal with their HMRC disclosure. Such individuals should make arrangements to speak to a member of our team, or their professional adviser, as soon as possible.
The LDF continues until 5 April 2016 so it is not yet too late to become fully UK tax compliant with favourable terms and penalty rates using this facility. We can also assist with obtaining a Liechtenstein ‘footprint’, if necessary, for those individuals who do not currently hold investments in Liechtenstein.
LDF – a reminder of the favourable terms
The Liechtenstein Disclosure Facility has enabled many clients who have inherited money offshore, earned money while abroad or who are non-UK-domiciled to reach very favourable settlements with minimal intrusion from HMRC. Here are some of the favourable terms on offer:
- Restriction of assessable years back to 1999.
- Favourable penalty rates of 10% up to 2008/09 and 20%+ thereafter.
- Assurance that criminal proceedings will not be pursued if a full disclosure is made and funds do not relate to wider criminality or VAT fraud.
The LDF process can be completed within several months, with little intrusion from HMRC and no requirement for you to attend a HMRC meeting. For further information, please contact me or a member of the LDF team on 0845 868 2050.
Credit: Grant Thornton