Press Release

27 August 2009

 

Opportunity for offshore account holders to slash the cost of using HMRC’s new “tax amnesty”

  • Qualifying UK taxpayers advised to open a Liechtenstein bank account before making a disclosure
  • More generous “tax amnesty” for offshore accounts opened locally rather than through UK branch or agency
  • Savings could run to hundreds of thousands, or even millions, of pounds per account holder

UK taxpayers planning to declare assets held in offshore bank accounts under HMRC’s latest “tax amnesty”, which begins on September 1, could slash the cost of making a disclosure by transferring assets into a Liechtenstein bank account first, says McGrigors, the leading commercial law firm and tax investigation specialists.

Phil Berwick, Director of Tax Investigations at McGrigors, comments: “HMRC is offering far more generous terms to UK taxpayers with Liechtenstein bank accounts than it is to those with offshore accounts in other jurisdictions. By opening a bank account in Liechtenstein and transferring funds there qualifying taxpayers will be able to take advantage of these more generous terms and substantially reduce their total liability.”


HMRC’s New Disclosure Opportunity (NDO) and Liechtenstein Disclosure Facility (LDF) will offer reduced penalties to individuals and businesses with undeclared income or gains held in offshore bank accounts or investments if they make a full disclosure.

Under the terms of both the NDO and the LDF taxpayers will be required to pay the tax due on income and gains on their unassessed tax liabilities (including those arising on shore), as well as interest and, in most cases, a fixed 10% penalty.

However, under the NDO, taxpayers will be required to disclose undeclared amounts going back 20 years, whilst under the LDF account holders will be required to come clean just for the last 10 years.


Phil Berwick says: “There is a vast difference between having to declare income and gains going back 10 years and going back 20 years. A UK resident who deposited £1 million from undeclared income or gains into an offshore account 20 years ago could save a very large amount of in tax, interest and penalties by using the Liechtenstein Disclosure Facility rather than the New Disclosure Opportunity. We estimate it could be a saving of over £2millon.”
 
According to McGrigors, HMRC has confirmed that taxpayers can open an account in Liechtenstein and qualify for the favourable terms of the LDF, provided that the original offshore account was opened directly with a branch of the bank in that offshore centre, for example in Guernsey, rather than through a UK branch or agency of the bank.

Jason Collins, a partner in the Tax Disputes and Investigations team at McGrigors, adds: “It seems an incredible situation – but HMRC are offering this facility to encourage taxpayers to come forward.  Where the offshore account was opened locally in that jurisdiction, HMRC have recognised they need to sweeten the deal as there is no UK "footprint" of the account which they can use their powers to obtain. Opening a bank account in Liechtenstein before making a disclosure substantially reduces a person's total liability”

McGrigors warns that offshore account holders who fail to come forward risk a penalty of between 30% and 100% of their total tax liability and face an increased risk of prosecution. McGrigors points out that HMRC has recently won a landmark case enabling it to obtain details of offshore bank accounts held by UK residents from a further 300 financial institutions with a UK branch or agency, and has just signed an agreement with Liechtenstein to identify UK taxpayers’ accounts in that jurisdiction.

Phil Berwick adds: “HMRC is determined to clamp down on undeclared offshore accounts and is warning those who decide not to participate in these disclosure facilities that it is simply a matter of time before it catches up with them.”

“Opening a Liechtenstein bank account gives UK residents with qualifying offshore accounts the chance to wipe the slate clean with HMRC at a far lower cost.”

Andy Peat

Business Development Director
Telephone: +44 (0)20 7054 2710
Mobile:  +44 (0)7894 835 386
Email: andy.peat@mcgrigors.com

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