In September 2009, HMRC announced the introduction of (primarily) an offshore tax disclosure facility called the Liechtenstein Disclosure Facility or LDF for short.
The disclosure facility is one part of 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, which include:
Whilst the facility was primarily designed to disclose unpaid taxes from overseas accounts, it was possible to disclose wholly domestic matters and still retain the favourable terms. In addition, even when an enquiry had been issued (not in the case of a Code of Practice 9 case) it was possible to "flip" the enquiry into the facility.
However, from August 2014 HMRC announced various restrictions to certain favourable terms to ensure that the spirit of the LDF was not being abused.
The circumstances of these restrictions fall into three broad categories:
The favourable terms that are not available to people who fall within any of the above three categories are those that can lead to a reduction in the amount paid to HMRC. These are known as the full favourable terms and are:
In a surprise announcement in the recent Budget it was confirmed that the LDF and the disclosure facilities for the Crown Dependences of Jersey, Guernsey and Isle of Man will close on 31 December 2015. It is to be replaced with a final disclosure facility which will commence from 1 January 2016 and will run to 2017 to coincide with the provision of tax information under the Inter-Governmental Agreements (IGAs) in 2016 and the Common Reporting Standard from 2017.
At present only limited details have been released about this new facility; these include the fact that there will be no immunity from prosecution and that the level of penalties will be at least 30%. Whilst not confirmed, it is likely that there will be no option to elect for the Composite Rate Option, which is one of the LDF's most favourable benefits in order to extinguish IHT liabilities.
Whilst there is a little under 6 months to the end of the LDF, if individuals do have unpaid taxes connected with overseas accounts or structures who haven't come forward yet, then they really do need to register for the LDF to take advantage of the beneficial terms, which will not be available come 1 January 2016. Please contact Doug Sinclair, Partner and Head of Tax Investigations on 020 8922 9328 or firstname.lastname@example.org to discuss how the LDF can work for you.
The above is abridged from an article in 25 June 2015 edition of Taxation Magazine, titled The final countdown.Back to Articles
The information provided in this article is for general information purposes only. The information is not intended to be comprehensive or to include advice on which you may rely. You should always consult a suitably qualified professional on any specific matter.
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