Liechtenstein Disclosure Facility to face early closure

The UK Government has announced in today’s Budget that it will close the Liechtenstein Disclosure Facility (LDF) half a year earlier than expected in order to make room for a “tougher” disclosure facility.

The LDF is an agreement between the Principality of Liechtenstein and HMRC which gives UK taxpayers with undeclared funds in offshore banks an opportunity to anonymously regularise their tax affairs without criminal prosecution and a penalty of just 10% on tax.

The facility was originally due to close in April 2016, but will now close at the end of 2015 in order to make way for a tougher ‘last chance’ disclosure facility in advance of the receipt of tax data under the new Common Reporting Standard in 2017.

The new facility will be open between 2016 and 2017 and will have penalties of at least 30% on top of tax owed and interest. Additionally, users will have no immunity from criminal prosecutions in appropriate cases.

“Starting in 2016 for the crown dependencies and overseas territories, HMRC will receive a wide range of information on offshore accounts held by UK tax residents, including names, addresses, account numbers, interest and balances,” the Government said.

“Building on this, the government will toughen sanctions for those who continue to evade tax by closing the existing disclosure facilities for tax evaders early.”

This news will come as a further blow to the LDF, which, as of last December, had raised little over one third of its £3bn target yield.

In anticipation of the new disclosure facility, the Government also announced that it will be closing existing crown dependency disclosure facilities at the end of 2015, rather than September 2016.

Tough approach

Sean Bannister, senior associate, tax, at Edwin Coe, said the Government’s early closure of the LDF demonstrates the severity of HMRC’s approach to offshore tax avoidance.

“With just over nine months remaining to enter into what the Budget insinuates as being the best terms to come forward under, the onus is significantly placed upon those with liabilities, whether they be individuals, corporate directors or even trustees to take steps immediately.

“It is evident from today’s budget that HMRC will not look kindly at those who have not used the opportunities available to them to come forward.”

Rachael Griffin, financial planning expert at Old Mutual Wealth, said: “The Government is continuing its clamp down on tax avoidance, and has shortened the disclosure period for the LDF.

“It believes it will raise £5bn through further scrutiny of overseas tax avoidance, making it even more important that people focus on legitimate ways to make their money tax efficient.”

John Cassidy, tax investigation partner national audit, tax and advisory firm Crowe Clark Whitehill said: “This news really does emphasise that anyone with something to declare needs to do so quickly.

“The new disclosure facility is to be based on penalties of at least 30% of the tax due, with no immunity from prosecution, whereas the current Liechtenstein Disclosure Facility provides for penalties as low as 10% and a guarantee of no prosecution. Those wishing to come forward now have less time to avail themselves of these more beneficial terms”