Tax Disputes & Investigations - The Liechtenstein Disclosure Facility

The Liechtenstein Disclosure Facility

 

 

The Liechtenstein Disclosure Facility (LDF) offers very favourable terms to those taxpayers able to take advantage of it.  The process can be of benefit to those with an offshore tax problem, or offshore disclosure to make. The LDF is, potentially, a true tax amnesty. As explained below, you do not need to currently hold a bank account in Liechtenstein to participate in that process.

 

The process should not be confused with the New Disclosure Opportunity (NDO), which is a separate procedure and offers inferior disclosure terms.  The LDF is primarily for UK taxpayers with accounts, investments or structures in Liechtenstein with unassessed tax liabilities related to that account, etc. 

 

McGrigors has been appointed by the Liechtenstein Bankers Association to advise its members on the process.  This puts us in a unique position to be able to advise clients with UK tax problems, or other professional advisers with clients who have problems, on the process.

 

What are the main advantages of the LDF?

 

One of the main advantages of the LDF is that disclosure is limited to the period from April 1999, rather than 1990 under the NDO, meaning substantial savings can be made. Taxpayers coming forward under the LDF will be expected to make a full disclosure of all unassessed liabilities, including those arising in the UK or on other offshore bank accounts (the disclosure period relating to those accounts may be the same as for the NDO even if using the LDF).  Another significant advantage is the immunity from prosecution (see below).

 

Will I be contacted by my Liechtenstein bank or trust company?

 

Yes.  Liechtenstein is in the process of passing legislation requiring all its banks and fiduciary companies to contact any client linked to the UK in order to ask them if their UK tax affairs are up to date and, if not, to make a disclosure to HMRC.  This process is unlikely to start until the middle of next year.  However, we would advise against waiting for your bank or trust company to contact you:  if HMRC contact you in the meantime, you will lose many of the beneficial terms of the LDF.

 

What if I do not hold a bank account, etc in Liechtenstein?

 

If you have a tax problem with an offshore account not held in Liechtenstein, you may still be able to use the LDF.  If the account was opened in the overseas jurisdiction (rather than through a UK branch or agency), you can bring that account within the terms of the LDF by opening a new account in Liechtenstein.  This is not a "loophole" - this feature of the LDF was intended by HMRC. We can put you in touch with banks in Liechtenstein to open a qualifying account, and guide you through the process.

 

Where an overseas bank account was opened prior to 1999, substantial savings can be made by disclosing via the LDF, rather than the NDO.  On a deposit of £1 million from undisclosed income or gains 20 years ago the savings can be in excess of £2 million.  Those with modest amounts of undeclared tax liabilities can still make significant savings, and substantially reduce their tax bill - legally.  Inheritance Tax liabilities can also be dealt with favourably under the LDF.

 

The source of funds is irrelevant, providing they are not the proceeds of a crime other than tax evasion (for example corruption or commercial fraud).  What is important is where the account was opened.  For example, if a taxpayer flew to Jersey in 1990 and opened a bank account, they would be able to bring that account within the favourable terms of the LDF (by now obtaining an account or investment in Liechtenstein).  If the account had been opened through a branch of the bank in the UK, they would not be able to do so.

 

Who is affected?

 

Any UK resident with unassessed tax liabilities connected with a Liechtenstein bank account, financial portfolio or structure (such as trust enterprises (“Treuhandschaften”), foundations (“Stiftungen”) and establishments (“Anstalt”)) is affected.  This includes individuals, companies, partnerships and trusts.

 

A person with a UK tax problem associated with a non-Liechtenstein account may be able to use the LDF, as noted above.

 

There are certain exceptions, and potential restrictions of the LDF terms, and we will be happy to discuss these with you.


Registering for the LDF

 

There is a registration process for the LDF.  Where the investment, etc in Liechtenstein was held on 1 August 2009, the person was able to register from the start of the facility (1 September). Otherwise, if investments or assets are moved into Liechtenstein after that date, the person can register from 1 December 2009 (at the end of the registration period for the New Disclosure Opportunity).

 

Level of penalty

 

A fixed penalty of 10% will be charged on the same terms as the NDO, except in irregularities connected to accounts which were opened via a UK branch or agency.  Where "innocent error" applies, a penalty will not be due.

 

Immunity from prosecution

 

HMRC have stated that a taxpayer making a full, complete and unprompted disclosure under the LDF will not be prosecuted by them for a tax-related offence, providing the source of the funds associated with Liechtenstein do not arise from wider criminality, such as corruption, commercial fraud,. and not disclosing assets in divorce proceedings.  If you have any concerns about this type of matter, you should take specialist legal advice. 

 

How can we help you or your clients?

 

We can assist taxpayers with disclosures to make, and help them through the LDF process.  We can consider whether you are able to bring a non-Liechtenstein offshore account within the LDF procedure (and the favourable terms on offer) rather than the NDO. We can also help accountants or other advisers who have clients with disclosures to make.  We can also put clients in touch with Liechtenstein bankers to open a bank account there.

 

Is what I tell you confidential?

 

Yes.  Anything you tell us in legitimate circumstances is covered by "legal professional privilege" and neither HMRC nor any other Government agency can force disclosure.  In October 2009, the High Court confirmed that this protection does not apply to firms of accountants or tax advisers.

 

It is never too early to speak with one of our investigation specialists.  You can discuss confidentially any concerns and queries you may have, and we will assess the options available to you.  We can guide you through the disclosure process.  Please call our 24-hour disclosure helpline on +44 (0)20 7054 2569 or contact one of the specialists listed below.


London

Jason Collins
Partner, Tax Disputes & Investigations
Tel: +44 (0)207 054 2727
Email: jason.collins@mcgrigors.com

 

Phil Berwick
Director, Tax Disputes & Investigations
Tel: +44 (0)207 054 2548
Email: phil.berwick@mcgrigors.com

 

Manchester

Joe Quinn
Director, Tax Disputes & Investigations
Tel: +44 (0)161 662 8029
Email: joe.quinn@mcgrigors.com