Liechtenstein Disclosure Facility

Panacea Tax | Tax Specialists At A Price You Can Afford

Liechtenstein Disclosure Facility

In September 2009, HMRC announced the introduction of what was primarily an offshore tax disclosure facility called the Liechtenstein disclosure facility (LDF).

The principal concepts of the two previous facilities were taken on board, together with certain other benefits to entice individuals to come forward.

Initially, the disclosure facility was to close on 31 March 2015, but this was later extended to 5 April 2016. However, the end date has now been revised again to 31 December 2015.

The LDF results from an agreement signed between the UK and Liechtenstein governments which enable any persons with unreported liabilities connected with assets held overseas to settle with HMRC on favourable terms.

These include:

  • no liability for any period before 6 April 1999;
  • a fixed 10% penalty for periods from 6 April 1999 to 5 April 2009:
  • the ability to choose a single composite rate rather than calculate actual liabilities;
  • a single point of contact for disclosures; and
  • immunity from prosecution for the tax offence.

While the facility was designed primarily to disclose unpaid taxes relating to overseas accounts, it was possible to disclose even wholly domestic matters and still retain the favourable terms.

Further, even when an enquiry had been started it was possible to “flip” the enquiry into the facility as long as it had not been undertaken under HMRC’s Code of Practice 9 (suspected tax fraud).

Some aspects of the LDF were, frankly, too good to last. Thus, in August 2014, HMRC announced that, to ensure the spirit of the LDF was not being abused, the scope of the facility would be reduced in some cases.

These restricted cases fall into three broad categories.

  • Cases where the relevant person enters the LDF to settle liabilities of which HMRC is already aware.
  • Cases where the particular issue disclosed has already been subject to an HMRC intervention (broadly, enquiry) that began more than three months before the date of application.
  • Cases where there is no substantial connection between the liabilities disclosed and any offshore asset held by the relevant person on 1 September 2009.

In such cases, the first three LDF benefits listed above are not available, namely:

  • No liability for any period before 6 April 1999.
  • A fixed 10% penalty for periods from 6 April 1999 to 5 April 2009.
  • The ability to choose a single composite rate rather than calculate actual liabilities.

The last two LDF benefits listed above, namely a single point of contact for disclosures and immunity from prosecution, remain available.

This leaves immunity from prosecution as the key LDF benefit in such cases. In some circumstances, such as when the taxpayer is within one of the groups particularly at risk of prosecution for tax fraud, this is extremely valuable.