Common Reporting Standard looms as LDF closes
Tax payers are more concerned about the invasion of their privacy rather than an investigation into their tax affairs
Tax payers have just over a fortnight left to voluntarily utilise the favourable terms of the Lichtenstein Disclosure Facility (LDF) before it is closed on 31 December 2015.
It will be replaced by the involuntary Common Reporting Standard (CRS) which comes into force on 1 January 2016 – a global initiative between more than 90 countries to share the details of tax payers’ bank and trust accounts.
The LDF allows UK tax payers to disclose their undeclared overseas tax liabilities in return for a decreased tax bill, reduced penalties and a guarantee of no prosecution (where appropriate). Any tax liabilities uncovered through the CRS will receive none of these favourable treatments.
Although the looming consequences are clear, Richard Morley, a tax partner at BDO, says that clients are more concerned with the loss of their privacy than the consequences of failing to be forthright.
‘A recent survey conducted by BDO amongst International Private Clients Advisers suggested that the main concern their clients have with the CRS is the loss of financial privacy; more so than the prospect of an investigation into their tax affairs.
‘It was revealed that people think the move away from financial secrecy has gone too far. However, the reality is the government is committed to taking a tougher stance on tax evasion and pushing its agenda for a new transparent world.’
The exchange taking place between the LDF and CRS is in line with a wider international strategy to tackle tax evasion through markedly increased transparency obligations.
The Unites States’ FATCA legislation and intergovernmental agreements have led the way, and the CRS follows in their footsteps.
The UK’s upcoming Finance Bill 2016 includes a new criminal offence that will reverse the burden of proof onto tax payers, as well as new penalties for financial institutions that facilitate tax avoidance.
Morley is under no illusions as to what the CRS means for everyone: ‘People must realise that once CRS is implemented and tax authorities make enquiries into someone’s tax affairs, there will be nowhere left to hide.’
